u.s. court of international trade · dia burke, assistant director. of counsel was ayat mujais, ......

U.S. Court of International Trade◆

Slip Op. 20–57

GOODLUCK INDIA LIMITED, Plaintiff, v. UNITED STATES, Defendant, andARCELORMITTAL TUBULAR PRODUCTS, MICHIGAN SEAMLESS TUBE, LLC,PLYMOUTH TUBE CO. USA, PTC ALLIANCE CORP., WEBCO INDUSTRIES,INC. and ZEKELMAN INDUSTRIES, INC, Defendant-Intervenors.

Before: Gary S. Katzmann, JudgeCourt No. 18–00162

[The court sustains Commerce’s Remand Results].

Dated: April 30, 2020

Ned H. Marshak, Andrew T. Schutz, Jordan C. Kah and Michael S. Holton, Grun-feld, Desiderio, Lebowitz, Silverman & Klestadt, LLP, of New York, NY and Washing-ton, DC, for plaintiff.

Ann C. Motto, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S.Department of Justice, of Washington, DC, for defendant. With her on the brief wereJoseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, and Clau-dia Burke, Assistant Director. Of counsel was Ayat Mujais, Office of the Chief Counselfor Trade Enforcement & Compliance, Office of the General Counsel, U.S. Departmentof Commerce, of Washington, DC.

David C. Smith, R. Alan Luberda, Melissa M. Brewer and Kathleen M. Cusack,Kelley Drye & Warren, LLP, of Washington, DC, for defendant-intervenors.

OPINION

Katzmann, Judge:

The court returns to an antidumping (“AD”) investigation by theUnited States Department of Commerce (“Commerce”) in which itrejected corrected information submitted by a respondent duringverification of Commerce’s investigation results. Before the court isCommerce’s Final Results of Redetermination Pursuant to Court Re-mand (Dep’t Commerce Dec. 23, 2019), ECF No. 55 (“Remand Re-sults”), which the court ordered in Goodluck India Limited v. UnitedStates, 43 CIT __, 393 F. Supp. 3d 1352 (2019). Under protest, Com-merce recalculated Goodluck India Limited’s (“Goodluck”) dumpingmargin to zero percent, thus excluding Goodluck from AD duties.Remand Results at 9. Plaintiff Goodluck and Defendant the UnitedStates (“the Government”) request that the court sustain the RemandResults. Pl.’s Resp. to Def.-Inters.’ Comments in Opp’n to Final Re-mand Redetermination at 5, March 6, 2020, ECF No. 59 (“Pl.’s Br.”);Def.’s Reply to Comments on Remand Redetermination at 1, March 6,2020, ECF No. 60 (“Def.’s Br.”). Defendant-Intervenors ArcelorMittal

51

Tubular Products, Michigan Seamless Tube, LLC, PTC, AllianceCorp., Webco Industries, Inc., and Zekelman Industries, Inc. request“that the [c]ourt reconsider[] its order directing Commerce to considerthe corrected submission filed by Goodluck.” Def.-Inters.’ Commentsin Opp’n to Final Remand Redetermination at 1, Feb. 5, 2020, ECFNo. 57 (“Def.-Inters.’ Br.”). The court sustains the Remand Results.

BACKGROUND

The court set out the relevant legal and factual background of theproceedings in further detail in its previous opinion, Goodluck India,393 F. Supp. 3d at 1356–62. Information relevant to the instantopinion is set forth below.

On May 16, 2017, Commerce initiated an AD investigation intocold-drawn mechanical tubing from India and selected Goodluck as amandatory respondent in that investigation. See Certain Cold-DrawnMechanical Tubing of Carbon and Alloy Steel from the Federal Re-public of Germany, India, Italy, the Republic of Korea, the People’sRepublic of China, and Switzerland: Initiation of Less-Than-Fair-Value Investigations, 82 Fed. Reg. 22,491 (Dep’t Commerce May 16,2017); U.S. Dep’t of Commerce Questionnaire to Goodluck (June 19,2017), P.R. 81. Commerce published the preliminary results of itsinvestigation on November 22, 2017, concluding that Goodluck’sdumping margin was de minimis based on Goodluck’s reported data.See Certain Cold-Drawn Mechanical Tubing of Carbon and AlloySteel From India: Preliminary Affirmative Determination of Sales atLess Than Fair Value, in Part, Postponement of Final Determination,and Extension of Provisional Measures, 82 Fed. Reg. 55,567, 55,569(Nov. 22, 2017). On both the first day of Commerce’s sales verificationand on the first day of its cost verification of its preliminary results,Goodluck reported corrections to its previously reported data thataffected Commerce’s preliminary dumping margin. See Remand Re-sults at 4. However, Commerce rejected these corrections as untimelynew factual information submitted outside the investigation periodand then rejected Goodluck’s originally reported data as unreliable.See Cold-Drawn Mechanical Tubing of Carbon and Alloy Steel FromIndia: Final Affirmative Determination of Sales at Less than FairValue, 83 Fed. Reg. 16,296 (Apr. 16, 2018) (“Final Determination”),and accompanying Issues and Decision Memorandum at 10–14 (Apr.9, 2018), P.R. 311. Commerce thus calculated Goodluck’s AD marginbased on adverse facts available (“AFA”) and applied the highestdumping margin of 33.8 percent. Final Determination at 16,297.

Goodluck then challenged the Final Determination before the court.Goodluck claimed “that Commerce’s determination was unsupported

52 CUSTOMS BULLETIN AND DECISIONS, VOL. 54, NO. 19, MAY 20, 2020

by substantial evidence and contrary to law because (1) Commerceabused its discretion by rejecting Goodluck’s correction submission atverification; (2) Commerce’s reliance on [AFA] was not warrantedwhere there were no gaps in the record and where Goodluck did notsignificantly impede the investigation; and (3) Commerce deviatedfrom its typical practice when calculating Goodluck’s export subsidycash deposit without adequate explanation.” Goodluck India, 393 F.Supp. 3d at 1362–63. The court agreed with Goodluck as to its firstclaim and found that “Goodluck’s revised data submission should[have been] categorized as a correctible importer mistake as opposedto untimely new factual information.” Id. at 1370. Therefore, in theprevious opinion, the court did not reach “whether Commerce’s reli-ance on facts otherwise available and adverse inferences is supportedby substantial evidence and in accordance with law.” Id. The courtremanded the case to Commerce “to consider Goodluck’s correctedsubmission as well as to explain why it . . . departed from its generalpractice for calculating export subsidy cash deposit offset rates . . . .”Id. at 1363.

On remand, Commerce, under protest, “accept[ed] Goodluck’s re-vised databases, and recalculate[ed] Goodluck’s dumping rate pursu-ant to the [previous opinion and order].” Remand Results at 1. Thus,Commerce did not apply AFA in calculating Goodluck’s dumpingmargin on remand, but instead calculated Goodluck’s dumping mar-gin as zero based on those revised databases. Id. at 9. The Govern-ment then filed the final Remand Results with the court on December23, 2019. Remand Results. Defendant-Intervenors filed their com-ments on the Remand Results on February 5, 2020. Def.-Inters.’ Br.Goodluck and the Government filed replies to those comments onMarch 6, 2020. Pl.’s Br.; Def.’s Br. The court now reviews the RemandResults “for compliance with the court’s remand order.” See BeijingTianhi Indus. Co. v. United States, 39 CIT __, __, 106 F. Supp. 3d1342, 1346 (2015) (citations omitted).

DISCUSSION

The Government and Goodluck request that the court affirm theRemand Results. Pl.’s Br. at 5; Def.’s Br. at 1. Defendant-Intervenors,however, challenge the court’s original decision to remand to Com-merce its rejection of Goodluck’s corrected data. See Def.-Inters.’ Br.at 1. Because Commerce complied with the court’s remand order, thecourt affirms the Remand Results.

In its previous opinion, the court ordered Commerce on remand toaccept Goodluck’s corrections to its reported data and to calculate itsAD margin using that data. See Goodluck India, 393 F. Supp. 3d at


1363. The court agrees with the Government that the Remand Re-sults show that “Commerce requested that Goodluck place the cor-rected database on the remand record, which Goodluck did, andrecalculated the margin for Goodluck based on the submission, asdirected” by the court. See Def.’s Br. at 4. Commerce recalculated anAD margin for Goodluck of zero percent. Remand Results at 9. Be-cause Goodluck “will no longer be subject to the AD order on cold-drawn mechanical tubing from India,” Commerce did not need torecalculate a cash deposit rate for Goodluck as ordered by the court’sremand. Id. Therefore, the court need not reach the AFA applicationand cash deposit issues.

Defendant-Intervenors ask the court to reverse its previous opin-ion, which remanded Commerce’s Final Determination, claiming that“the [c]ourt inappropriately substituted its judgment for that of theagency.” Def.-Inters.’ Br. at 5. Defendant-Intervenors argue that, inthe Final Determination, Commerce correctly relied on 19 U.S.C. §1677m(d)–(e) in making the factual determination to reject Good-luck’s original databases and in applying adverse facts available toGoodluck in calculating its dumping margin. Id. at 5–7. Thus, theyargue, “Commerce was entitled to, and properly did, follow the stat-ute in rejecting Goodluck’s new information for the Final Determina-tion, and it should not have been directed by the [c]ourt to giveconsideration to Goodluck’s untimely submitted information.” Id. at12. On that basis, Defendant-Intervenors request that the court re-consider its previous opinion. Id.

The court is not persuaded by Defendant-Intervenors’ request. InGoodluck India, the court decided that, under existing case law andCommerce’s own practice, Commerce abused its discretion by reject-ing Goodluck’s minor corrections, and thus the Final Determinationwas not supported by substantial evidence or in accordance with law.393 F. Supp. 3d at 1363–64 (citing NTN Bearing Corp. v. UnitedStates, 74 F.3d 1204 (Fed. Cir. 1995); Fischer S.A. Comercio v. UnitedStates, 34 CIT 334, 700 F. Supp. 2d 1364 (CIT 2010); Certain Hot-Rolled Steel Flat Products from the United Kingdom, 81 Fed. Reg.53,436 (Dep’t Commerce Aug. 12, 2016)). For that reason, the courtwas not required to defer to Commerce’s decision to reject Goodluck’scorrected data. The court concluded that Goodluck’s corrections wereminor and that Commerce should have accepted those corrections inaccordance with its past practice. Id. By accepting those corrections,Commerce has now complied with the remand order, acting in accor-dance with law. Further, as Goodluck notes, Defendant-Intervenorsdo not cite to any subsequently published precedent that would un-


dermine the court’s analysis in Goodluck India or identify any “fac-tual mistakes or clerical errors,” Pl.’s Br. at 2, in that previous opin-ion. See Def.-Inters’ Br.

CONCLUSION

Commerce complied with the court’s remand instructions, andDefendant-Intervenors’ arguments do not persuade the court to re-visit its previous opinion. For the above stated reasons, the courtsustains Commerce’s Remand Results.

SO ORDERED.Dated: April 30, 2020

New York, New York/s/ Gary S. Katzmann

GARY S. KATZMANN, JUDGE

◆

Slip Op. 20–58

NOVOLIPETSK STEEL PUBLIC JOINT STOCK COMPANY and NOVEX TRADING

(SWISS) SA, Plaintiffs, v. UNITED STATES, Defendant, and STEEL

DYNAMICS, INC. and NUCOR CORPORATION, Defendant-Intervenors.

Before: Claire R. Kelly, JudgeCourt No. 19–00194

[Granting Defendant and Defendant-Intervenors’ motions to dismiss for lack ofsubject matter jurisdiction.]

Dated: May 1, 2020

Valerie Ellis, Curtis, Mallet-Prevost, Colt & Mosle LLP, of Washington, D.C., forplaintiffs Novolipetsk Steel Public Joint Stock Company and NOVEX Trading (Swiss)SA.

Joseph H. Hunt, Assistant Attorney General, Commercial Litigation Branch, CivilDivision, U.S. Department of Justice, of Washington, D.C., for defendant. With him onthe brief were Jeanne E. Davidson, Director, Tara K. Hogan, Assistant Director, andKelly A. Krystyniak, Trial Attorney. Of counsel was Brandon J. Custard, Attorney,Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Departmentof Commerce, of Washington, D.C.

Roger B. Schagrin, Luke A. Meisner, and Kelsey M. Rule, Schagrin Associates, ofWashington, D.C., for defendant-intervenor Steel Dynamics, Inc.

Alan H. Price, Christopher B. Weld, Maureen E. Thorson, and Cynthia C. Galvez,Wiley Rein LLP, of Washington, D.C., for defendant-intervenor Nucor Corporation.

OPINION AND ORDER

Kelly, Judge:

Before the court are Defendant the United States’ and Defendant-Intervenors Steel Dynamics, Inc. and Nucor Corporation’s motions todismiss Plaintiffs’ complaint for lack of subject matter jurisdiction.


See Def.’s Mot. Dismiss, Dec. 23, 2019, ECF No. 19 (“Def.’s Br.”);Proposed Def.-Intervenors’ Mot. Dismiss Pls.’ Compl., Nov. 21, 2019,ECF No. 18 (“Def.-Intervenors’ Br.”).1 Plaintiffs Novolipetsk SteelPublic Joint Stock Company (“NLMK”) and NOVEX Trading (Swiss)SA (“NOVEX”) bring this action to challenge the U.S. Department ofCommerce’s (“Commerce” or “Department”) failure to determine anall others rate, following Commerce’s determination that it wouldtreat the Russian Federation (“Russia”) as a market economy (“ME”)country and the United States’ extension of permanent normal trad-ing relations (“PNTR”) to Russia, in the antidumping duty (“ADD”)order on hot-rolled flat-rolled carbon-quality steel products (“HRC”)from Russia. See Compl. at ¶¶ 2–3, 6–42, Oct. 22, 2019, ECF No. 5; seealso Termination of the Suspension Agreement on [HRC] from [Rus-sia], Rescission of 2013–2014 Administrative Review, and Issuance of[ADD] Order, 79 Fed. Reg. 77,455 (Dep’t Commerce Dec. 24, 2014)(“ADD Order”). Plaintiffs allege that Commerce unlawfully and erro-neously failed to determine an all others rate in the ADD Order,following Russia’s graduation to an ME country and the extension ofPNTR, when it had, instead, calculated a country-wide rate in thefinal determination. See Compl. at ¶¶ 17–18, 26(a), 27–28. Plaintiffsalso challenge the all others rate as arbitrary and capricious, unsup-ported by substantial evidence, an abuse of agency discretion, andexceeding express statutory limitations. Id. at ¶¶ 26(b), 29–34. Giventhe application of the country-wide rate as an all others rate, Plain-tiffs also contend Russian exporters are treated less favorably thanexporters in other former non-market economy (“NME”) countries,resulting in unlawful discriminatory treatment. Id. at ¶¶ 26(c),35–42.

Defendant and Defendant-Intervenors, in their motions to dismiss,contend that the court lacks subject matter jurisdiction to entertainPlaintiffs’ claims. See Def.’s Br. at 2, 6–13; Def.-Intervenors’ Br. at6–16. According to Defendant and Defendant-Intervenors, Plaintiffs’complaint is a challenge to the all others rate in the ADD Order, adetermination reviewable under 28 U.S.C. § 1581(c). See Def.’s Br. at8–10; Def.-Intervenors’ Br. at 6–13. In the alternative, Defendant andDefendant-Intervenors contend that even if the court has jurisdictionunder 28 U.S.C. § 1581(i), Plaintiffs’ challenge is untimely and barredby the statute of limitations, because their cause of action accrued

1 In its motion to dismiss, Defendant cites U.S. Court of International Trade (“USCIT”) Rule12(b)(6) as the basis to dismiss Plaintiffs’ complaint. See Def.’s Br. at 2. However, Defendantelaborates that the court lacks subject matter jurisdiction and does not challenge thecomplaint for failing to state a claim. Id. at 2, 6–13. Therefore, the court understandsDefendant to move under USCIT Rule 12(b)(1) to dismiss Plaintiffs’ complaint.


over two years prior to commencing this action. See Def.’s Br. at10–13; Def.-Intervenors’ Br. at 14–16. Plaintiffs counter that jurisdic-tion lies under 28 U.S.C. § 1581(i), because they do not contest a finaldetermination by Commerce, but challenge Commerce’s alleged dis-criminatory treatment and its administration and enforcement of theADD laws, which causes continuing harm. See Pls.’ Resp. Opp’n[Def.’s Br.] at 8–17, Jan. 27, 2020, ECF No. 23 (“Pls.’ Resp. Def.’s Br.”);Pls.’ Resp. Opp’n [Def.-Intervenors’ Br.] at 5–15, Dec. 27, 2019, ECFNo. 20 (“Pls.’ Resp. Def.-Intervenors’ Br.”); see also Compl. at ¶¶ 2–3.In addition, Plaintiffs aver that they timely initiated this challenge,because their cause of action accrued within the statute of limita-tions. See Pls.’ Resp. Def.’s Br. at 12–17; Pls.’ Resp. Def.-Intervenors’Br. at 12–16.2 For the reasons that follow, the court lacks jurisdictionover Plaintiffs’ claims and Defendant’s and Defendant-Intervenors’motions to dismiss are granted.

BACKGROUND

On October 22, 1998, Commerce initiated an ADD investigation onimports of HRC from Russia, and selected, inter alia, NovolipetskIron & Steel Corporation (“NISCO”)3 as a respondent. See Initiationof [ADD] Investigations: [HRC] from Brazil, Japan, and [Russia], 63Fed. Reg. 56,607 (Dep’t Commerce Oct. 22, 1998); Notice of Prelim.Determination of Sales at [LTFV]; [HRC] from [Russia], 64 Fed. Reg.9,312, 9,314 (Dep’t Commerce Feb. 25, 1999) (“Prelim. Results”). Sub-sequently, on March 1, 1999, NISCO informed Commerce by letterthat it was withdrawing from participation in the investigation. SeeNotice of Final Determination of Sales at [LTFV]: [HRC] from Russia,64 Fed. Reg. 38,626, 38,628 (Dep’t Commerce July 19, 1999) (“FinalResults”). On July 12, 1999, Commerce entered into an agreementwith Russia’s Ministry of Trade to suspend the investigation (“Sus-pension Agreement”). See Suspension of [ADD] Investigation: [HRC]from [Russia], 64 Fed. Reg. 38,642, 38,642 (Dep’t Commerce July 19,1999). However, at the request of petitioners, Commerce continuedthe investigation and made an affirmative final determination of

2 Plaintiffs also allege that Defendant intentionally misled the court in using “Novolipetsk”as a short form to refer to three separate companies—NLMK, NOVEX, and NISCO—and bymischaracterizing certain facts about Commerce’s investigation of HRC from Russia. SeePls.’ Resp. Def.’s Br. at 1–8. Defendant acknowledges its errors, explains that any mischar-acterization was inadvertent, and notes that the factual issues raised are not germane tothe jurisdictional question. See Def.’s Reply Supp. Mot. Dismiss at 8–11, Mar. 10, 2020, ECFNo. 26. Given that, when the court evaluates a motion to dismiss for lack of subject matterjurisdiction, it must accept all undisputed allegations as true, Cedars-Sinai Med. Ctr. v.Watkins, 11 F.3d 1573, 1583–84 (Fed. Cir. 1993), Defendants’ recognition of its error nullifiesany alleged disagreement as to the relevant facts.3 According to Plaintiffs, NISCO was a state-owned enterprise and predecessor to NLMK.See Pls.’ Resp. Def.’s Br. at 6.


sales at LTFV. See Final Results, 64 Fed. Reg. at 38,627.4 Commercecalculated a country-wide, or Russia-wide, dumping margin of 184.56percent and a weighted-average dumping margin of 73.59 percent forJoint Stock Company Severstal, which received a separate rate. Seeid., 64 Fed. Reg. at 38,641. The International Trade Commission(“Commission”) also made an affirmative determination of materialinjury. See [HRC] from Brazil and [Russia], 64 Fed. Reg. 46,951 (Int’lTrade Comm’n Aug. 27, 1999). No ADD order issued.

In 2002, Commerce announced that it would consider Russia an MEcountry for purposes of applying U.S. antidumping laws. See Compl.at ¶ 11; see also 19 U.S.C. § 1677(18)(C) (“Any determination that aforeign country is a nonmarket economy country shall remain ineffect until revoked by the administering authority.”). A decade later,in 2012, Russia became a member of the World Trade Organization,and the United States extended PNTR. See Russia and MoldovaJackson-Vanik Repeal and Sergei Magnitsky Rule of Law Account-ability Act of 2012, Pub. L. No. 112–208, 126 Stat. 1496; Proclamation8920 of Dec. 20, 2012 to Extend Nondiscriminatory Treatment (Nor-mal Trade Relations) to the Products of [Russia] and the Republic ofMoldova, 77 Fed. Reg. 76,797 (Pres. Doc. Dec. 28, 2012); see also 19U.S.C. § 2434.5 On July 10, 2014, domestic interested parties askedby letter that Commerce terminate the Suspension Agreement andimpose antidumping duties on HRC imports from Russia. See ADDOrder, 79 Fed. Reg. at 77,455. Soon after, on August 29, 2014, Com-merce, at the request of Russian HRC producers, initiated an admin-istrative review of the Suspension Agreement, for the period of July 1,2013 to June 30, 2014. See id. Following a letter sent to Russia statingCommerce’s intent to terminate the Suspension Agreement, Com-merce terminated the Suspension Agreement, effective December 19,

4 Commerce used “total adverse facts available” to derive the Russia-wide rate, becausecertain respondents did not respond to Commerce’s request for information and Commercecould not verify, inter alia, NISCO’s questionnaire response due to its withdrawal from theinvestigation. See Final Results, 64 Fed. Reg. at 38,630. The phrase “total adverse factsavailable” or “total AFA” encompasses a series of steps that Commerce takes to reach theconclusion that all of a party’s reported information is unreliable or unusable and that asa result of a party’s failure to cooperate to the best of its ability. Parties and Commercesometimes use the shorthand “AFA” or “adverse facts available” or “AFA” to refer toCommerce’s reliance on facts otherwise available with an adverse inference to reach a finaldetermination. However, AFA encompasses a two-part inquiry pursuant to which Com-merce must first identify why it needs to rely on facts otherwise available, and second,explain how a party failed to cooperate to the best of its ability as to warrant the use of anadverse inference when “selecting among the facts otherwise available.” See 19 U.S.C. §1677e(a)–(b).5 PNTR is a legal designation, indicating that the United States has extended “most favorednation” to a trading partner. See Internal Revenue Service Restructuring and Reform Act of1998, Pub. L. No. 105–206, 112 Stat. 685 (replacing the term “most favored nation” withPNTR).


2014. See id., 79 Fed. Reg. at 77,456. Commerce then rescinded theadministrative review and issued an ADD order. See id. In the ADDOrder, Commerce set the cash deposit rate equal to the marginscalculated in the final determination, setting the Russia-wide rate of184.56 percent as the all others rate and assigning Joint Stock Com-pany Severstal a weighted-average dumping margin of 73.59 percent.See Final Results, 64 Fed. Reg. at 38,641; ADD Order, 79 Fed. Reg. at77,456.

On October 23, 2017, Plaintiffs made an entry of HRC from Russia,and subsequently requested administrative review of the ADDOrder. See [HRC] from [Russia], 84 Fed. Reg. 4,776 (Dep’t CommerceFeb. 19, 2019) (prelim. results of [ADD] admin. review; 2016–2017),and accompanying Decision Memo. for the Prelim. Results of the[ADD] Admin. Review of [HRC] from [Russia], A-821–809 (Feb. 11,2019), available at https://enforcement.trade.gov/frn/summary/russia/2019–025861.pdf (last visited Apr. 28, 2020) (“Admin. Rev.Prelim. Decision Memo.”).6 Commerce preliminarily determined thatPlaintiffs did not make a bona fide sale. See Admin. Rev. Prelim.Decision Memo. at 7–8. In its final determination, Commerce main-tained its finding that Plaintiffs did not make a bona fide sale, re-scinded the administrative review, and continued to assign an allothers rate of 184.56 percent. See [HRC] from [Russia], 84 Fed. Reg.38,948, 38,949 (Dep’t Commerce Aug. 8, 2019) (final results andrescission of [ADD] admin. review) (“Final Results in 16–17 Admin.Review”), and accompanying Issues & Decision Memo. for the [FinalResults in 16–17 Admin. Review] at 17–18, A-821–809, (Aug. 2,2019), available at https://enforcement.trade.gov/frn/summary/russia/2019–17006–1.pdf (last visited Apr. 28, 2020) (“Final DecisionMemo. in 16–17 Admin. Review”). NLMK and NOVEX commenced aseparate action, also pending before this court, challenging Com-merce’s Final Results in 16–17 Admin. Review. See generally Novoli-petsk Steel Public Joint Stock Company v. United States, Ct. No.19–00172.

STANDARD OF REVIEW

The party seeking the Court’s jurisdiction has the burden of estab-lishing that jurisdiction exists. See Norsk Hydro Can., Inc. v. UnitedStates, 472 F.3d 1347, 1355 (Fed. Cir. 2006); see also Kokkonen v.Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). When decid-ing a motion to dismiss for lack of subject-matter jurisdiction, the

6 Specifically, NLMK had made a sale to NOVEX, the importer of record. See Pls.’ Resp.Def.-Intervenors’ Br. at 7; see also Final Decision Memo. in 16–17 Admin. Review at 14.


Court must first determine whether the motion seeking dismissal“challenges the sufficiency of the pleadings or controverts the factualallegations made in the pleadings.” See H & H Wholesale Servs., Inc.v. United States, 30 CIT 689, 691, 437 F. Supp. 2d 1335, 1339 (2006)(citation omitted). If the motion controverts the basis for jurisdictionpled by the non-moving party, then “the allegations in the complaintare not controlling,” and the court assumes that all undisputed factsalleged in the complaint are true. Cedars-Sinai Med. Ctr. v. Watkins,11 F.3d 1573, 1583–84 (Fed. Cir. 1993).

DISCUSSION

Defendant and Defendant-Intervenors contend that the court lackssubject matter jurisdiction over Plaintiffs’ claims under 28 U.S.C. §1581(i), which requires dismissal of the complaint. See Def.’s Br. at8–13; Def.-Intervenors’ Br. at 7–16. According to both, Plaintiffs chal-lenge an ADD order embodying a final determination that would havebeen reviewable under 28 U.S.C. § 1581(c) had Plaintiffs broughttimely action; now, however, administrative review is the propermeans to challenge the all others rate. See Def.’s Br. at 10; Def.-Intervenors’ Br. at 10–13. Plaintiffs counter that they do not seekjudicial review of an agency determination that would establish ju-risdiction under subsection 1581(c); rather, they challenge Com-merce’s failure to determine an all others rate, which is reviewableunder subsection 1581(i). See Pls.’ Resp. Def.’s Br. at 11; Pls.’ Resp.Def.-Intervenors’ Br. at 5–7.7 Further, Plaintiffs argue that even ifthey could pursue administrative review as another remedial avenueunder subsection 1581(c), the remedy would be manifestly inad-equate and, therefore, would support the exercise of residual juris-diction over the present action. See Pls.’ Resp. Def.’s Br. at 10, 17; Pls.’Resp. Def.-Intervenors’ Br. at 7–12. For the reasons that follow, thecourt lacks subject matter jurisdiction over Plaintiffs’ claims.

Depending on the designation of a country as an NME or ME,Commerce applies different methodologies to calculate normal valuein an antidumping investigation, which affects the calculation ofdumping margins. Normal value refers to “the price at which theforeign like product is first sold . . . for consumption in the exportingcountry[.]” 19 U.S.C. § 1677b(a)(1)(B)(i). A dumping margin is “theamount by which normal value exceeds the export price or con-

7 In response to Defendant’s factual allegations concerning the history of the investigationof HRC from Russia, Plaintiffs intimate that “Commerce’s AD order, which ended theinvestigation segment, is unlawful” because domestic interested parties did not meet theburden of persuasion that the Suspension Agreement should be terminated. See Pls.’ Resp.Def.’s Br. at 7–8. However, because Plaintiffs “had not intended to challenge Commerce’simproper termination of the suspension agreement,” the court does not address that issue.Id. at 7.


structed export price of the subject merchandise.” Id. at § 1677(35)(A).For an ME country, Commerce determines normal value on the basisof sales or constructed normal value. See 19 U.S.C. § 1677b(a); seealso 19 C.F.R. § 351.403–351.407. By contrast, if the exporting coun-try is designated as an NME, “sales of merchandise in [that NME]country do not reflect the fair value of merchandise.” 19 U.S.C. §1677(18)(A). Therefore, Commerce determines normal value based onan NME producer’s factors of production, used to produce the subjectmerchandise, in an ME country or countries. See id. at § 1677b(c); seealso 19 C.F.R. § 351.408. Commerce assumes that all producers arepart of the government-entity and, in its preliminary and final deter-minations, calculates one country-wide margin, unless an investi-gated respondent demonstrates it qualifies for a separate rate. See 19C.F.R. § 351.408.8

Irrespective of whether Commerce applies the NME or ME meth-odology, Commerce issues preliminary and final determinations,where it estimates the “weighted average dumping margin for eachexporter and producer individually investigated” and the “all-othersrate for all exporters and producers not individually investigated.” 19U.S.C. §§ 1673b(d)(1)(A), 1673d(c)(1)(B)(i); see also 19 C.F.R. §§351.205, 351.210. The all others rate is the “amount equal to theweighted average of the estimated weighted average dumping mar-gins established for exporters and producers individually investi-gated, excluding any zero and de minimis margins, and any marginsdetermined entirely under section 1677e of this title” (i.e., based onfacts available). 19 U.S.C. § 1673d(c)(5); see also id. at § 1677e.Following a final affirmative determination of sales at LTFV, and afinal affirmative determination of injury by the Commission, Com-merce issues an ADD order, which marks the end of the investigativephase of the proceeding. See id. at § 1673e(a)–(b); 19 C.F.R. § 351.211.Commerce imposes antidumping duties “in an amount equal to theamount by which the normal value exceeds the export price (or theconstructed export price) for the merchandise.” 19 U.S.C. § 1673; seealso id. at § 1673e(a).

Section 1581 enumerates the Court’s jurisdictional bases. 28 U.S.C.§ 1581. Relevant here, subsection (c) grants the Court “exclusivejurisdiction of any civil action commenced under section 516A or 517of the Tariff Act of 1930,” id. at § 1581(c), which pertain to determi-nations in countervailing duty and ADD proceedings and claims of

8 In 1999, when Commerce issued the Preliminary Results and Final Results, Commerce’spractice was to assign separate rates to NME investigated respondents that completedquestionnaire responses and established their eligibility for a separate rate by demonstrat-ing an absence of government control in law and in fact. See Prelim. Results, 64 Fed. Reg.at 9,315–16.


evasion of countervailing duty and ADD orders, respectively. 19U.S.C. §§ 1516a, 1517. Subsection (i) is a “residual” grant of jurisdic-tion for review of, inter alia, the “administration and enforcement” ofclaims that can be challenged under 28 U.S.C. § 1581(c), see 28 U.S.C.§ 1581(i)(4), and claims when the remedy under another subsection of1581 would be manifestly inadequate. See Fujitsu Gen. Am., Inc. v.United States, 283 F.3d 1364, 1371 (Fed. Cir. 2002).

Here, Plaintiffs’ request for a redetermined all others rate lies in achallenge to the ADD Order, which would support jurisdiction under1581(c). See Compl. at ¶ 26, Prayer for Judgment and Relief.9 Com-merce initiated its investigation of HRC imports from Russia, desig-nated at that time as an NME country, and, in its final determination,calculated a Russia-wide rate as well as a weighted-average rate. SeeFinal Results, 64 Fed. Reg. at 38,629, 38,641. When Commerce issuedits ADD Order, following Russia’s designation as an ME country, itstated that it was “instructing CBP to require a cash deposit for eachentry equal to the AD weighted-average margin rates found in theDepartment’s Final Determination” and that the “all others rateapplies to all producers and exporters of subject merchandise notspecifically listed.” ADD Order, 79 Fed. Reg. at 77,456. Commercemade no further reference to the all others rate. See generally id.Commerce’s conclusory pronouncement concerning the all others ratein the ADD Order does not affect the jurisdictional question before the

9 Although Plaintiffs allege that Commerce’s failure to determine an all others rate consti-tutes defective administration of antidumping laws, see Compl. ¶¶ 2, 26–28, Commercemade a final determination and published the ADD Order, consistent with its statutoryobligations. In the final determination, Commerce applied its NME methodology to deter-mine the amount by which normal value exceeds export price, resulting in the calculationof Russia-wide and weighted-average dumping margins. See generally Final Results. WhenCommerce issued the ADD Order, subsequent to the designation of Russia as an MEcountry, it imposed “an antidumping duty equal to the amount by which the normal valueof the merchandise exceeds the export price (or the constructed export price) of the mer-chandise[.]” 19 U.S.C. § 1673e(a). More specifically, Commerce imposed an ADD in theamount equal to the Russia-wide rate it had found in the final determination. Further, Plaintiffs’ assertion that “the absence of an all others rate determination is notsusceptible to challenge under 19 U.S.C. § 1516a” is mistaken. Pls.’ Resp. Def.-Intervenors’Br. at 7. Plaintiffs equate Commerce’s failure to include “discussion or information . . . in theAD Order with respect to the all others rate” with a failure to make a determination withinthe meaning of 19 U.S.C. § 1677f(i). Id. at 5–6. Section 1677f(i) sets out the disclosurerequirements for, inter alia, preliminary and final determinations, not ADD orders. See 19U.S.C. 1677f(i)(1). An alleged deficiency in a determination does not mean a determinationwas not rendered. Here, Plaintiffs do not suggest that Commerce failed to publish a finaldetermination—and indeed acknowledge that Commerce issued the Final Results—but,instead, appear to challenge the ADD Order’s embodiment of the final determination. Morespecifically, Plaintiffs challenge the adoption of a country-wide rate as an all others ratewithout explanation in the ADD Order. See Pls.’ Resp. Def.-Intervenors’ Br. at 5–6. The ADDOrder would be susceptible to judicial review under 19 U.S.C. § 1516a. See 19 U.S.C. §1516a(a)(2)(A)(i)(II), (a)(2)(B)(i); see also 28 U.S.C. § 1581(c).


court. See Compl. at ¶¶ 26–28.10 Rather, to the extent that there is amismatch and lack of explanation between the final determination,where Commerce determined a Russia-wide rate, and the ADD Order,where Commerce set the all others rate, Plaintiffs would have beenable to challenge the all others rate in the ADD Order—which em-bodies the final determination—and to obtain a redetermined cashdeposit rate under subsection 1581(c). See 19 U.S.C. §1516a(a)(2)(A)(i)(II), (a)(2)(B)(i); 28 U.S.C. § 1581(c); see also U.S.Steel Corp. v. United States, 42 CIT __, __, 319 F. Supp. 3d 1295,1300–01 (2018).

However, jurisdiction under subsection 1581(c) is no longer avail-able. Section 1516a(a)(2)(B)(i) details what determinations may bechallenged when. See 19 U.S.C. § 1516a(a)(2)(B)(i); see also 28 U.S.C.§ 2636.11 A party may challenge an ADD order based upon a finalaffirmative determination by filing in this Court both a summons,within 30 days of the order’s publication in the Federal Register,and, within 30 days later, a complaint. See 19 U.S.C. §1516a(a)(2)(A)(i)(II), (a)(2)(B)(i). Here, Commerce issued its FinalResults and, following the termination of the Suspension Agreement,published the ADD Order. Neither Plaintiffs nor any participant tothe proceeding commenced an action within 30 days of the publica-tion of the ADD Order. Given that the ADD Order would have beensusceptible to challenge, jurisdiction would have laid under subsec-tion (c), foreclosing jurisdiction under subsection (i).12

10 In support of Plaintiffs’ view that Commerce failed to render a determination susceptibleto challenge, Plaintiffs contend that a “failure to act does not constitute a final agency actionsubject to review.” Pls.’ Resp. Def.’s Br. at 11. That argument does not find support in theAdministrative Procedure Act, which lists a failure to act as a type of agency actionsusceptible to judicial review. See 5 U.S.C. § 551(13)(defining an “agency action” as, interalia, a “failure to act”); see also id. at §§ 701, 705. In addition, Plaintiffs’ theory that a failureto act is not challengeable under the APA contradicts Plaintiffs’ claim for relief under theAPA, to compel Commerce to set an all others rate in the ADD Order. See Compl.; see alsoPls.’ Resp. Def.’s Br. at 11.11 Plaintiffs contend that its action is timely, because they were not injured until theybecame subject to posting cash deposits on October 23, 2017 and sought administrativereview. See Pls.’ Resp. Def.’s Br. at 8, 12–13. In making this argument, Plaintiffs focus on thetimeliness of an action under 28 U.S.C. § 1581(i). However, for the reasons discussed above,the court does not have subject matter jurisdiction under subsection (i).12 Defendant and Defendant-Intervenors argue that Plaintiffs could obtain a new cashdeposit rate by making sales of HRC and seeking administrative review of the ADD Order.Def.’s Br. at 10; Def.-Intervenors’ Br. at 11–12; see also 19 U.S.C. § 1675(a). Plaintiffsdisagree. They explain that in the 2017–2018 review Commerce again assigned an allothers rate of 184.56 percent and, in January 2020, issued liquidation instructions onNLMK merchandise exported by any party. See Pls.’ Resp. Def.’s Br. at 9. Plaintiffs allegethat even if they were to win the appeal in the 2016–2017 administrative review, that2017–2018 review would supersede and re-impose the 184.56 percent rate. Id. at 9–10.Plaintiffs characterize the application of a previously established margin as a cash depositrate in a subsequent administrative review as “an act of sabotage” and claim that the


CONCLUSION

For the foregoing reasons, it isORDERED that Defendant’s and Defendant-Intervenors’ motions

to dismiss are granted and Plaintiffs’ complaint is dismissed. Judg-ment will enter accordingly.Dated: May 1, 2020

New York, New York/s/ Claire R. Kelly

CLAIRE R. KELLY, JUDGE

◆

Slip Op. 20–59

IN ZONE BRANDS, INC. and GOOD2GROW, INC., Plaintiffs, v. UNITED

STATES, Defendant.

Before: Jane A. Restani, JudgeCourt No. 17–00025PUBLIC VERSION

[In Customs classification matter, Defendant’s motion for summary judgment isgranted and Plaintiffs’ cross-motion for summary judgment is denied.]

Dated: May 5, 2020

Daniel G. Jarcho, Kyle G. A. Wallace, Jason M. White, Brian W. Lutz, and ChulianYang Allston & Bird LLP, of Washington, D.C. for the Plaintiffs, In Zone Brands, Inc.and Good2Grow, Inc.

Peter A. Mancuso, Trial Attorney, Civil Division, U.S. Department of Justice, ofWashington, D.C., for the Defendant, the United States of America. With him on thebrief were Joseph H. Hunt, Assistant Attorney General, U.S. Department of Justiceand Justin R. Miller, Attorney-in-Charge, International Trade Field Office, Civil Divi-sion, U.S. Department of Justice, Commercial Litigation Branch. Of Counsel on thebrief was Michael W. Heydrich Attorney, Office of the Assistant Chief Counsel, Inter-national Trade Litigation, U.S. Customs and Border Protection, of New York, N.Y.

OPINION

Restani, Judge:

Plaintiffs In Zone Brands, Inc. (“In Zone”) and Good2Grow, Inc.(“Good2Grow”) brought this action contesting U.S. Customs and Bor-der Protection’s (“Customs”) tariff classification of the subject mer-chandise. The merchandise at issue (“bottle toppers”) depict thegovernments’ conduct is “likely to recur,” imposing a continuing harm. See id. at 10, 12–17.Also, given that Commerce “preordained” the outcome of the 2016–2017 administrativereview, Plaintiffs argue that they have no other remedy under section 1581 to challenge theall others rate than subsection (i). See Pls.’ Resp. Def.-Intervenors’ Br. at 8. Setting asidePlaintiffs’ characterizations, nothing they assert establishes jurisdiction in this case, be-cause they complain of the appropriateness of the all others rate imposed by the ADD order.Therefore, the court does not reach either Defendant’s and Defendant-Intervenors’ positionsregarding the availability of a challenge to an administrative review or Plaintiffs’ response.


heads and/or busts of popular children’s characters such as Iron Man,Thor, Sponge Bob, Angry Birds, Care Bears, Ariel, and Paw Patrol,fastened to a screw-top straw and base made for use with Plaintiffs’children’s beverages. In cross-motions for summary judgment, Plain-tiffs argue that the bottle toppers are properly classified as toys underHeading 9503 of the Harmonized Tariff Schedule of the United States(“HTSUS”) and the government argues that Customs properly clas-sified the bottle toppers under as “stoppers, lids, caps and otherclosures” under Heading 3923.50. For the reasons stated below, thegovernment’s motion is granted and Plaintiffs’ motion is denied.

I. BACKGROUND

The bottle toppers were imported between January 9, 2013, andAugust 16, 2014. Def.’s Statement of Undisputed Material Facts ¶ 3(“Def. Facts”); Pl.’s Resp. to Def.’s Statement of Undisputed MaterialFacts ¶ 3 (“Pl. Resp. Facts”). At liquidation, Customs classified themerchandise under subheading 3923.50.00, HTSUS (2013),1 whichprovides for “Articles for the conveyance or packing of goods, of plas-tics; stoppers, lids, caps and other closures, of plastics: Stoppers, lids,caps and other closures.” Pl.’s Statement of Material Facts Not inDispute ¶ 85 (“Pl. Facts”); Def.’s Resp. to Pl.’s Statement of Undis-puted Material Facts ¶ 85 (“Def. Resp. Facts”). Good2Grow2 timelyprotested, averring that the bottle toppers were properly classifiedunder 9503.00.00, HTSUS as “Tricycles, scooters, pedal cars andsimilar wheeled toys; dolls’ carriages; dolls; other toys; reduced-scale(‘scale’) models and similar recreational models, working or not;puzzles of all kinds; parts and accessories thereof.” Pl. Facts ¶¶86–87; Def. Resp. Facts ¶¶ 86–87. Although a protest at the Port ofAtlanta was approved, Customs then issued HQ H264771, which ledto the denial of protests at the Ports of Tampa and Jacksonville. Pl.Facts ¶¶ 88–91; Def. Resp. Facts ¶¶ 88–91. Good2Grow appealedthese denials. The parties filed cross-motions for summary judgmentand supporting briefs arguing their respective positions. See Def.’sMot. for Summ. J. & Mem. in Supp. of Mot. for Summ. J., ECF No. 51(June 28, 2019) (“Def. Br.”); Pl.’s Cross-Mot. for Summ. J. & Mem. ofLaw in Resp. to Def.’s Mot. for Summ. J. & in Supp. of Pl.’s Cross-Mot.for Summ. J., ECF No. 70 (Nov. 8, 2019) (“Pl. Br.”).

The following facts are undisputed. The bottle toppers are three-dimensional molded plastic figures made to resemble various licensed

1 The Court notes that some of the merchandise at issue is subject to the 2014 version of theHTSUS, but that there are no differences relevant to this case between the two versions.Accordingly, all citations will be to the 2013 version unless otherwise noted.2 Prior to 2015, Good2Grow, Inc. was called “In Zone Brands”. See First Am. Compl. ¶ 5. Forease of reference, the court will refer to the company as Good2Grow.


characters3 that can be affixed to a spout with a valve and threadedbase made to screw onto Good2Grow juice bottles.4 Pl. Facts ¶ 5; Def.Resp. Facts ¶ 5. The spout, valve, and threaded base (the “forecap”),Def. Facts ¶ 14; Pl. Resp. Facts ¶ 14, complies with applicable U.S.Food and Drug Administration (“FDA”) standards for beverage use.Def. Facts ¶ 22; Pl. Resp. Facts ¶ 22. Additionally, the bottle toppersalso comply with toy-specific standard ASTM F963–11 for choke test-ing. Pl. Facts ¶ 53; Def. Resp. Facts ¶ 53. The bottle toppers arereusable, dishwasher safe, and spill-proof due to a one-way valve.Def. Facts ¶¶ 11, 13; Pl. Resp. Facts ¶¶ 11, 13. Good2Grow juicebottles are hermetically sealed with foil, which is removed prior toconsumption. Pl. Facts. ¶ 17; Def. Resp. Facts ¶ 17. Good2Growprimarily targets children ages ten and younger, who comprise themajority of consumers. Pl. Facts ¶¶ 8–9; Def. Resp. Facts ¶¶ 8–9. Thebottle toppers are, at times, sold without the juice bottle online, butmost often are sold in retail locations (such as grocers, conveniencestores, mass merchants, and drug stores) with the juice bottle in-cluded. Def. Facts ¶¶ 30, 43; Pl. Resp. Facts ¶¶ 30, 43; Pl. Facts ¶ 24;Def. Resp. Facts ¶ 24.

II. JURISDICTION AND STANDARD OF REVIEW

The court has jurisdiction under 28 U.S.C. § 1581(a) (2012).5 Thecourt will grant summary judgment if “there is no genuine dispute asto any material fact and the movant is entitled to judgment as amatter of law.” USCIT R. 56(a). Summary judgment is appropriate intariff classification cases where “there is no genuine dispute as to thenature of the merchandise and the classification turns on the propermeaning and scope of the relevant tariff provisions.” Deckers OutdoorCorp. v. United States, 714 F.3d 1363, 1371 (Fed. Cir. 2013). TheCourt decides classification de novo. See 28 U.S.C. § 2640 (a)(1);Telebrands Corp. v. United States, 865 F. Supp. 2d 1277, 1279–80(CIT 2012).

III. DISCUSSION

a. Legal Framework

The plaintiff has the burden of demonstrating that the govern-ment’s classification is incorrect, but the court has an independent

3 [[ ]] Def. Facts ¶ 28; Pl. Resp. Facts ¶ 28.4 The toppers are uniquely threaded such that they do not fit standard bottles. Pl. Facts. ¶12; Def. Resp. Facts ¶ 12; Def. Facts ¶ 7; Pl. Resp. Facts ¶ 7.5 All further references to the U.S. Code will be to the 2012 edition unless otherwise noted.


duty to determine the correct classification. See Jarvis Clark Co. v.United States, 733 F.2d 873, 878 (Fed. Cir. 1984). The meaning of atariff term is a question of law and whether subject merchandise fallsunder a given tariff term is a question of fact. See Wilton Indus. v.United States, 741 F.3d 1263, 1265–6 (Fed. Cir. 2013) (citations omit-ted). The General Rules of Interpretation (“GRIs”) and, if applicable,the Additional U.S. Rules of Interpretation (“ARIs”), guide classifica-tion decisions under the HTSUS. Id. at 1266. The court applies theGRIs in numerical order and only continues to a subsequent GRI if“proper classification of the imported goods cannot be accomplishedby reference to a preceding GRI.” Id.GRI 1 requires classification to“be determined according to the terms of the headings and any rela-tive section or chapter notes.” GRI 1 (2013). HTSUS chapter andsection notes are considered binding statutory law. See BenQ Am.Corp. v. United States, 646 F.3d 1371, 1376 (Fed Cir. 2011). Once thecorrect heading is identified, the court determines which subheadingcorrectly identifies the merchandise in question. Orlando Food Corp.v. United States, 140 F.3d 1437, 1440 (Fed. Cir. 1998) (citing GRI 1, 6).

b. Competing Tariff Provisions

The government classified the bottle toppers under subheading3923.50.00, HTSUS at 5.3% ad valorem. The relevant portions ofChapter 39 of the HTSUS read:

3923 Articles for the conveyance or packing or packing of goods, ofplastics; stoppers, lids, caps and other closures, of plastics:

3923.50.00 Stoppers, lids, caps and other closures.

Good2Grow contends that the bottle toppers should enter free ofcharge under subheading 9503.00.00, HTSUS, as:

9503.00.00 Tricycles, scooters, pedal cars and similar wheeled toys; dolls’carriages; dolls, other toys; reduced-scale (“scale”) modelsand similar recreational models, working or not; puzzles ofall kinds; parts and accessories thereof.

Although the bottle toppers may be properly classified under3923.50.00, the court must first assess whether they are properlyclassified under 9503.00.00, HTSUS because Note 2(y) to Chapter 39specifically excludes “[a]rticles of chapter 95 (for example, toys,games, sports equipment).” Note 2(y) to ch. 39, HTSUS. Turning toChapter 95, however, the court is met with another note that thegovernment argues must be considered before the relevant heading.


c. Note 1(v) to Chapter 95

The government argues that Note 1(v)6 to Chapter 95 precludesclassification of the bottle toppers as toys under Heading 9503. Def.Br. at 11–13. Note 1(v) excludes from classification under Chapter 95:

Tableware, kitchenware, toilet articles, carpets and other textilefloor coverings, apparel, bed linen, table linen, toilet linen,kitchen linen and similar articles having a utilitarian function(classified according to their constituent material).

Note 1(v) to ch. 95, HTSUS. Good2Grow avers that Note 1(v) is oflimited application meant to exclude “traditional utilitarian itemsdecorated with a holiday motif” from classification under Chapter 95.Pl. Br. at 13. Further, Good2Grow notes that a footnote to Note 1(v)directs one to subheading 9817.95,7 which allows duty-free entry ofcertain “utilitarian articles” used in relation to a “religious or culturalritual” or holiday. Id. at 12 (citing 9817.95, HTSUS). The governmentresponds that Good2Grow’s reading is contrary to the text, which isnot so limiting, and that the cases Good2Grow cites do not support itsinterpretation of Note 1(v). See Mem. of Law in Resp. to Pl.’s Cross-Mot. for Summ. J. & in Further Supp. of the Gov’t’s Mot. for Summ.J., ECF No. 61, at 8–9 (Oct. 7, 2019) (“Def. Reply”). In reply,Good2Grow argues that the government misapplies the ejusdem ge-neris canon and overreads the breadth of Note 1(v). Pl.’s Reply toDef.’s Resp. to Pl.’s Cross-Mot. for Summ. J., ECF No. 65, at 1–2 (Nov.4, 2019). (“Pl. Reply”). Further, Good2Grow contends that Customs’stance during the United States International Trade Commission(“ITC”) Investigation No. 1205–6 estops the government from inter-preting Note 1(v) to narrow the scope of heading 9503 such that thiscourt’s decision in Minnetonka Brands, Inc. v. United States, 110 F.Supp. 2d 1020 (CIT 2000) should be reconsidered. Pl. Reply at 1–4. Insupplemental briefing requested by the court, the government main-tains that Note 1(v) categorically excludes the bottle toppers fromchapter 95 given their inherent utility. See Def.’s Sur-Reply, ECF No.72, at 6–7 (Feb. 26, 2020) (“Def. Suppl. Br.”). Good2Grow continues toargue that Note 1(v) was expressly concerned with festive articles,that it has no applicability here, and that Customs has previously

6 Now Note 1(w) in the current version of the HTSUS. See Note 1(w) to ch. 95, HTSUS(2020).7 The relevant provisions are:9817.95.01 Utilitarian articles of a kind used in the home in the performance of specific

religious or cultural ritual celebrations for religious or cultural holidays, orreligious festive occasions, such as Seder plates, blessing cups, menorahs orkinaras

9817.95.05 Utilitarian articles in the form of a three-dimensional representation of asymbol or motif clearly associated with a specific holiday in the United States.


found that Note 1(v) does not alter the classification of toys. See Pl.’sResp. to Def.’s Sur-Reply, ECF No. 73, at 1–5 (Mar. 9, 2020) (“Pl.Suppl. Br.”).

The ITC Report referenced by Good2Grow provides some insight asto the proper scope of Note 1(v). See Proposed Modifications to theHarmonized Tariff Schedule of the United States, Inv. No. 1205–06,USITC Pub. 3851 (Apr. 2006) (Final) (“ITC Report”). As the Court ofAppeals for the Federal Circuit noted, concerns regarding the breadthof Note 1(v) led the ITC to recommend new, duty-free subhead-ings–9817.95.01 and 9817.95.05–for certain festive articles in orderto “maintain substantial rate neutrality” of those items. See MichaelSimon Design, Inc. v. United States, 609 F.3d 1335, 1337 (Fed. Cir.2010); see also WWRD US, LLC v. United States, 886 F.3d 1228, 1234(Fed. Cir. 2018) (noting that this new duty-free exception was limitedto certain festive utilitarian items used “in the performance of specificreligious or cultural ritual celebrations.”). Good2Grow appears tounderstand Note 1(v)’s reference to subheading 9817.95 to mean thatNote 1(v) was exclusively concerned with utilitarian items decoratedwith certain motifs. See Pl. Br. at 13. Not so. Note 1(v)’s language isnot so narrow, and nothing referenced by either party indicates thatit was limited to utilitarian items with certain festive motifs.8 In fact,Heading 9817.959 and the reference to it in Note(1)(v) were added toensure that certain festive articles received duty-free treatment not-withstanding Note (1)(v). See Certain Festive Articles: Recommenda-tions for Modifying the Harmonized Tariff Schedule of the UnitedStates, 75 Fed. Reg. 57,293, 57,294 (Int’l Trade Comm’n Sept. 20,2010); see also Michael Simon Design, 609 F.3d at 1337. Note 1(v)appears to simply reinforce the longstanding understanding thatcertain merchandise with a primarily utilitarian purpose is not prop-erly classified under Chapter 95. See Childcraft Educ. Corp. v. UnitedStates, 742 F.2d 1413, 1415 (Fed. Cir. 1984) (“When amusement andutility become locked in controversy, the question becomes one ofdetermining whether the amusement is incidental to the utilitarianpurpose, or the utility purpose incidental to the amusement”) (quot-ing Ideal Toy Corp. v. United States, 78 Cust. Ct. 28, 33 C.D. 4688

8 Good2Grow’s citation to this court’s opinions in Infantino LLC v. United States, Ct. No.11497, Slip Op. 14–155, 2014 WL 7331753 (CIT Dec. 24, 2014) and Springs Creative Prods.Grp. v. United States, Ct. No. 10–67, Slip Op. 13–107, 2013 WL 4307857 (CIT Aug. 16, 2013)are unavailing. The court in those cases did not address Note 1(v) and stand for theunremarkable position that merchandise with incidental or some utility still may beproperly classified under Chapter 95. See Infantino, Slip Op. 14–155 at 13–15, 2014 WL7331753, at *8; Springs Creative, Slip Op. 13–107 at 15–18, 2013 WL 4307857, at *8.9 Chapter 98 is national in scope and not part of the international harmonized system. SeeCertain Festive Articles: Recommendations for Modifying the Harmonized Tariff Scheduleof the United States, 75 Fed. Reg. 57,293, 57,294 (Int’l Trade Comm’n Sept. 20, 2010).


(1977)); see also ITC Report at 10 (stating that the “intent of note 1(v)was not to alter the classification of toys, but to reflect the existingscope of chapter 95[.]”); Limitation of the Application of the Decisionsof the Court of International Trade and the Court of Appeals for theFederal Circuit in Park B. Smith v. United States, 40–15 Cust. B. &Dec. 5, 18 (Apr. 5, 2006) (“the new legal note language was viewed asnothing more than a clarification of the existing scope of the head-ing.”).10

Turning to normal principles of classification, Note (1)(v) is onlyapplicable if the bottle toppers do “not have a more specific primarypurposes that is inconsistent with the listed exemplars.” Otter Prods.,LLC v. United States, 834 F.3d 1369, 1376 (Fed. Cir. 2016) (citationand quotation omitted). Some ancillary utility does not necessarilyrender merchandise improperly classified under Chapter 95. Accord-ingly, whether the bottle toppers are subject to Note 1(v) is decided byassessing whether its principal purpose is utilitarian in nature. Toanswer this question, the court addresses Good2Grow’s contentionthat the principal purpose of the bottle toppers is not utilitarian andinstead is “to provide amusement, diversion, or play.” Pl. Br. at 31.

d. The Merchandise is Not Properly Classified UnderChapter 95

To determine whether subject merchandise is a “toy” under Chapter95, the court must determine whether its principal use is for “amuse-ment, diversion, or play.” See Processed Plastics Co. v. United States473 F.3d 1164, 1170 (Fed. Cir. 2006)11 (citing Minnetonka, 110 F.Supp. 2d at 1026). ARI 1 “dictates how tariff classification should beconstrued when the classification decision is controlled by use.” Pri-mal Lite, Inc. v. United States, 182 F.3d 1362, 1363 (Fed. Cir. 1999).ARI 1(a)12 requires the court to determine what group of goods “are

10 Good2Grow’s arguments regarding the interpretive tool ejusdem generis are unavailing.Insofar as that framework is helpful, the bottle toppers are similar to “tableware [or]kitchenware” given that their function, at least in part, is to transmit juice for consumptionand seal for later use. Accordingly, the bottle toppers are sufficiently “like [the] namedexemplars” in Note (1)(v). See Deckers Corp. v. United States, 532 F.3d 1312, 1314 (Fed. Cir.2008). As detailed below, the bottle toppers are additionally “articles having a utilitarianfunction and classified according to their constituent material.” Note 1(v) to ch. 95, HTSUS.11 The Federal Circuit agreed “with the standard adopted in Minnetonka to determinewhether merchandise should be classified as a toy,” and considered whether the “primaryuse” of merchandise at issue in that case rendered the product a toy. Processed Plastics, 473F.3d at 1170. Accordingly, the court treats Heading 9503 as a use provision. See id.; see alsoStreetsurfing LLC v. United States, 11 F. Supp. 3d 1287, 1294 (CIT 2014) (noting that“9503.00.00, is a principal use provision.”)12 In the absence of special language or context which otherwise requires—

(a) a tariff classification controlled by use (other than actual use) is to be determined inaccordance with the use in the United States at, or immediately prior to, the date ofimportation, of goods of that class or kind to which the imported goods belong, and thecontrolling use is the principal use. ARI 1(a).


commercially fungible with the imported goods.” Aromont USA, Inc.v. United States, 671 F.3d 1310, 1313 (Fed. Cir. 2012) (citation omit-ted). This court may consider the factors outlined in United States v.Carborundum Co., 536 F.2d 373, 377 (CCPA 1976) to determine theprincipal use of the subject merchandise. Aromont, 671 F.3d at1312–13; see also Processed Plastics, 473 F.3d at 1170 (noting that theCarborundum factors “are simply areas of inquiry that may proveuseful in determining what is the principal use of merchandise al-leged to be a ‘toy.’”). The Carborundum factors include: use of themerchandise, physical characteristics of the merchandise, economicpracticality, expectations of the ultimate purchasers, channels oftrade, environment of sale, and recognition in trade. See id., 671 at1313–16. The court evaluates each in turn.

i. Use in the same manner as merchandise whichdefines the class

Good2Grow offered evidence showing that children sometimes usethe bottle toppers in various fantasy play and sometimes collect them.See e.g., Pl.’s Exs. 8, 51, 52 (photographs of children playing with thetoppers and social media comments about children collecting andplaying with the toppers). Further, Good2Grow cites surveys showingthat a [[ ]]. It avers that the use ofthe toppers in these ways renders them comparable to toys. Pl. Br. at26–30. The government argues that notwithstanding evidence thatchildren play with the bottle toppers, they are nearly always boughtand used, at least initially, for their functional attributes. Def. Br.33–36.

Collectability does not a toy make. To be sure, that some customerscollect the toppers favors Good2Grow’s argument, but that the bottletoppers are collected by some purchasers does not definitively renderthem anymore a toy than collectible stamps, coins, or spoons. Like-wise, that some children engage in imaginative play with the bottletoppers does not necessarily result in their proper classification astoys. See Simon Marketing, Inc. v. United States, 395 F. Supp. 2d at1280, 1291 (CIT 2005) (“To classify every eye-catching, child-friendlyarticle as a toy, simply because it enhances a child’s imagination, is tounacceptably blur the HTSUS headings defeating their purpose andleading to absurd results.”). Good2Grow’s own research shows thateven if children sometimes play with the toppers they are first andforemost bought and used for their functional attributes. See Def.’sEx. 43 ([[ ]]).Some play value is not enough to overcome this primary functionaluse. The court will not classify merchandise based on “fugitive” use of


the product. See Stewart-Warner Corp. v. United States, 748 F.2d 663,668–69 (Fed. Cir. 1984).

ii. Physical characteristics of the merchandise

The physical characteristics distinguish the bottle toppers fromtoys. Although the toppers resemble popular children’s charactersand thus are certainly more like toys than other juice bottle tops, theadditional functionality make them distinct from the prototypical toy.

The parties agree that the toppers meet toy-specific specifications,such as for choke testing, beyond what is required for standard lids orclosures, which supports Good2Grow’s contention to some extent. Pl.Facts ¶ 53; Def. Resp. Facts ¶ 53; Pl. Br. at 18–20. Good2Grow furtherpoints to various production steps that are unnecessary for standardcaps or lids. See Pl. Br. at 18–19. But the parties also agree that themerchandise has a threaded cap, straw, and valve that allows thetopper to serve as a spill-proof drink dispenser. Pl. Facts. ¶ 5; Def.Resp. Facts ¶ 5; Def. Facts ¶¶ 11, 13–16; Pl. Resp. Facts ¶¶ 11, 13–16.The character heads/busts are not capable of manipulation and arenot intended to be removed from the forecap base. Def. Facts ¶ 17; Pl.Resp. Facts ¶ 17. The government points out that in addition to thetoy specifications, the forecap is “specifically tested for compliancewith FDA standards for beverage use.” Def. Br. at 18; see also Def.Facts ¶ 22; Pl. Resp. Facts ¶ 22. Further, the bottle toppers aredishwasher safe and reusable with Good2Grow beverages. Def. Facts¶ 40; Pl. Resp. Facts ¶ 40. The functional aspects of the bottle toppersare not hidden, but obvious and affixed to the character depiction.Def. Facts ¶ 15; Pl. Resp. Facts ¶ 15. Although the bottles possesscertain “toy-like” features, those are ancillary to the inherent func-tional qualities.

iii. Economic Practicality

Good2Grow argues that the toppers should be classified as toysbecause they are far costlier than traditional closures. Pl. Br. at14–17. It notes that the functional aspects of the forecap cost lessthan the character depictions which require licensing and royaltyfees, among other additional production costs. Id. at 15. Good2Growspends beyond what is required to ensure that the bottle toppers arespill-proof. Id. Although the juice was once sold separately from thebottle toppers, Good2Grow phased out separate sales in stores as theywere lackluster. Id. at 16. Undoubtably, the cost of the juice withcharacter bottle topper, far exceeds the cost of most retail children’sjuice. See e.g. Pl. Facts ¶ 39; Def. Resp. Facts ¶ 39. Good2Grow arguesthat this makes the bottle toppers impracticable as anything otherthan a toy. Pl. Br. at 14–17.


Good2Grow’s evidence supports the opposite contention. It showsthat pairing the character topper with a juice bottle increases sales.See Id. at 16–17 (citing Pl.’s Exs. 3, 13, 41). Thus, rather than beingeconomically impracticable, the toppers are used as a lure to sell morejuice at a higher price differential. See Kraft Inc. v. United States, 16C.I.T. 483, 489 (1992) (noting that attractive packaging (in that casebear-shaped jars) “plays a key role in the marketing of food prod-ucts”). A feature introduced to differentiate a product and increasesales does not necessarily shift a product’s classification from oneHTSUS heading to another. That each unit costs more is not disposi-tive when Good2Grow’s own records shows that the additional topperappears to increase sales. See e.g.Def.’s Exs. 33 and 34 ([[ ]]).

iv. Expectations of the ultimate purchasers

Good2Grow makes a point to distinguish between the typical pur-chasers of its bottle toppers (parents) and the typical users of thetoppers (children). Pl. Br. at 23–30. Good2Grow cites a report by theBlake Project (a brand consulting firm) finding that consumersviewed the product as both a toy and beverage. Id. The governmentnotes that Good2Grow markets the bottle toppers with juice as ahealthy beverage and advertises the product’s functionality, for in-stance that it is dishwasher safe, reusable, and spill proof. Def. Br. at23–28 (citing Def.’s Exs. 18; 20). The government further quotesGood2Grow’s [[ ]] who on the company’s websitestates that “We put a beverage parents want their children to drinkin a package that kids will want to drink from.” Def. Br. at 26 (citingDef.’s Ex. 21). Ultimately, although there is support for both parties’arguments, this factor ultimately supports the government’s conten-tion that the toppers are not typically understood to be toys.

v. Channels of trade in which the merchandise moves

The channels of trade in which the bottle toppers are sold is notparticularly helpful to the court’s analysis. Although the bottle top-pers are distributed to grocery and convenience stores, which weighagainst a toy classification, they have also been sold in toy stores. SeeDef. Facts ¶¶ 30, 43, 46–48; Pl. Resp. Facts ¶¶ 30, 43, 46–48; Pl. Facts¶ 24–27; Def. Resp. Facts ¶ 24–27. This factor does not benefit eitherparty over the other.

vi. Environment of the sale

Although the bottle toppers are, at times, sold online without a juicebottle, both parties acknowledge that in stores the bottle toppers arenow always sold with the juice bottle attached. Def. Facts ¶¶ 30, 43;


Pl. Resp. Facts ¶¶ 30, 43; Pl. Facts ¶ 24; Def. Resp. Facts ¶ 24.Good2Grow appears to argue that because the merchandise is posi-tioned at children’s eye-level, this supports the conclusion that theproduct is a toy. Pl. Br. at 20–23. The government notes that whensold in stores the [[ ]] andthat the products are typically sold near other beverages. Def. Br.29–31.

That the bottle toppers are displayed in such a way to encouragechildren to see and pester their parents to buy them does not makethe product a toy, despite that such display may be consistent withhow toys are sold. The bottle toppers are no doubt eye-catching andhave some amusement value. But uncontroverted evidence demon-strates that the toppers are typically sold with other consumables,most often juice, not in the store locations that display toys. Def.Facts ¶¶ 43–45; Pl. Resp. Facts ¶¶ 43–45; see also Def.’s Ex. 17(photographs of Good2Grow displays). Although this factor supportsboth parties’ contentions to some extent, it ultimately favors thegovernment’s view that the bottle toppers are not toys.

vii. Recognition in Trade

Good2Grow argues that, like McDonald’s Happy Meal toys, itsproduct is understood to be a toy. Pl. Br. at 30–31. It additionally citesa few of its licensing agreements which describe the toppers as “toy-etic.” Id. The government notes that Good2Grow portrays itself inadvertising and marketing materials as “operating within the chil-dren’s beverage trade.” Def. Br. at 31–33. It further cites beveragetrade magazines featuring Good2Grow products. Id. at 32 (citing Def.Ex. 35). Good2Grow’s arguments are meritless. The reference to themarketing term “toyetic” in its licensing agreements does not estab-lish that its products are recognized in trade as toys. Good2Grow hasnot offered significant evidence to support that it is part of the toyindustry, rather than the beverage industry. Accordingly, this factorweighs in favor of the government.

viii. Balance of the Carborundum Factors and thisCourt’s decision in Minnetonka

In sum, the Carborundum factors, taken together, weigh in favor offinding that the bottle toppers are not properly classified as toys. Thiscase is distinguishable from Minnetonka, a case heavily relied on byGood2Grow. See Pl. Br. at 32–35. This difference merits additionaldiscussion. This case was decided prior to the addition of Note 1(v),which clarified that utilitarian goods are not properly classified under


Chapter 95. This change to the statutory scheme since Minnetonka,even if it was merely to clarify the existing legal parameters, requiresthe court to carefully consider whether its holding informs our deci-sion here.

The merchandise at issue in that case—bubble bath bottles shapedlike children’s characters—arguably had more inherent play valuegiven the resemblance on the bottle to a doll as it was a full-figuredrepresentation. See Minnetonka, 110 F. Supp. 2d at 1022. At firstglance, the product in that case appeared to be a toy, and only uponfurther inspection was it clear that the body of the character con-tained bubble bath. See id. In contrast, the utility of the bottle toppersis readily apparent, with or without the attached juice bottle. Fur-ther, in Minnetonka, the character head of the shampoo bottle wascompletely cosmetic as there was a screw on cap hidden beneath. Id.Although the topper at issue here is somewhat redundant to the foilseal, it provides additional functionality beyond the amusementadded by affixed character head, namely a spill-proof drinking appa-ratus and closure. Finally, the court in Minnetonka found that mer-chandise at issue did not compete with other bubble bath and was an“inefficient product for this purpose in terms of both quality andprice.” Id. at 1027. In contrast, here the evidence demonstrates thatthe character topper was ultimately employed to increase the profitthat Good2Grow made in the children’s beverage industry. See infra.At base, although the toppers involve substantial production costsbeyond that of standard caps, their inclusion increased the profitabil-ity of juice sales and Good2Grow’s competition in that marketplace.Whether a product is properly classified as a toy is not a bright-linequestion, but the court concludes that whether or not the merchan-dise at issue in Minnetonka would have been correctly classified as atoy under current law, that case’s logic and reasoning does not extendto the bottle toppers at issue here.

The court acknowledges that there is certainly some amusementvalue to the bottle toppers, but concludes that this is incidental to theproduct’s practical purposes such that Note 1(v) is applicable here.Further, viewed in their totality, the relevant factors dictate that thebottle toppers are not commercially fungible with the merchandise inHeading 9503, and thus are not classifiable under that heading.

e. The Merchandise is Properly Classified Under Chapter 39

The parties disagree about whether Heading 3923 covering “[a]r-ticles for the conveyance or packing or packing of goods, of plastics;stoppers, lids, caps and other closures, of plastics,” is an eo nomine or


a use provision. Good2Grow cites this court’s opinion in S.C. Johnson& Son, Inc. v. United States, which found that “Articles for theconveyance or packing or packing of goods, of plastics” renderedHeading 3923, a principal use provision. Pl. Br. at 8 (citing 335 F.Supp. 3d 1294, 1299 (CIT 2018)). The government argues that “stop-pers, lids, caps and other closures, of plastics” is an eo nomine provi-sion as it describes articles by specific names. Def. Br. at 10–11.

Good2Grow is correct that the language cited in S.C. Johnson wasfound to indicate a use provision, but mistakenly attempts to applythe court’s analysis to the first portion of Heading 3923 to the court’sdetermination here. As the court has recognized, the use of a semi-colon results in “distinct categories of merchandise.” B.P. Prods. N.Am. Inc. v. United States, 716 F. Supp. 2d 1291, 1295 (CIT 2010)(citing Commercial Aluminum Cookware Co. v. United States, 938 F.Supp. 875, 883 (CIT 1996)). Accordingly, S.C. Johnson, is not at oddswith this court’s determination that the latter clause in Heading3923, “stoppers, lids, caps and other closures, of plastics,” is an eonomine provision as it describes merchandise by name rather thanuse. Furthermore, since the principle use of this product is to seal orclose the juice bottle applying a principal use analysis would notchange the result in this case.

“An eo nomine designation, with no terms or limitation, will ordi-narily include all forms of the named article.” Carl Zeiss, Inc. v.United States, 195 F.3d 1375, 1379 (Fed. Cir. 1999) (citations andquotations omitted). The parties acknowledge that the toppers serveto close the juice bottle and prevent spills. The decorative aspect doesnot remove the bottle topper from the scope of HTSUS 3923 as thisalteration is not “substantially in excess of those within the commonmeaning of the term.” See Casio, Inc. v. United States, 73 F.3d 1095,1098 (Fed. Cir. 1996) (citation and quotation omitted). The bottletoppers are “stoppers, lids, caps and other closures,” the court finds nomore apt classification heading.

f. Subheading

Having determined that the proper classification Heading is 3923,the court addresses which subheading best encompasses the mer-chandise. “For legal purposes, the classification of goods in the sub-headings of a heading shall be determined according to the terms ofthose subheadings and any related subheadings notes and, mutatismutandis, to the [GRIs], on the understanding that only subheadingsat the same level are comparable.” GRI 6, HTSUS. The bottle toppersare not sensibly classified under any alternative subheadings to the


one proffered by the government––3923.50. Compare subheadings3923.10 (“Boxes, cases, crates and similar articles”); 3923.21 (“Sacksand bags (including cones): of polymers of ethylene”); 3923.29 (“Sacksand bags (including cones): of other plastics); 3923.30 (“Carboys,bottles, flasks and similar articles”); 3923.40 (“Spools, cops, bobbins,and similar supports”); 3923.90, HTSUS (“Other”) with subheading3923.50.00, HTSUS, providing for “[s]toppers, lids, caps and otherclosures” plainly encompasses the merchandise at issue. Accordingly,the court finds the bottle toppers appropriately classified under3923.50.00, HTSUS.

IV. CONCLUSION

For the foregoing reasons, the court grants the government’s mo-tion for summary judgment, denies Plaintiffs’ cross-motion for sum-mary judgment, and holds that the government properly classifiedthe bottle toppers under subheading 3923.50.00, HTSUS, at 5.3% advalorem. Judgment will be entered accordingly.Dated: May 5, 2020

New York, New York/s/Jane A. Restani

JANE A. RESTANI, JUDGE

◆

Slip Op. 20–60

DIS VINTAGE LLC, Plaintiff, v. UNITED STATES, Defendant.

Before: Timothy M. Reif, JudgeCourt No. 16–00013

[Staying the cross-motions for summary judgment and remanding to Customs todetermine the classification and appropriate rate of duty in conformity with thisdecision.]

Dated: May 6, 2020

Peter S. Herrick, Peter S. Herrick, P.A. of St. Petersburg, FL argued for plaintiff DISVintage LLC. With him on the brief was Josh Levy, Marlow, Adler, Abrams, Newmanand Lewis, P.A. of Coral Gables, FL.

Monica P. Triana, Trial Attorney, Civil Division, Commercial Litigation Branch,U.S. Department of Justice of New York, NY argued for defendant United States. Withher on the brief was Chad A. Readler, Acting Assistant Attorney General and Amy M.Rubin, Assistant Director, International Trade Field Office of New York, NY. Of Coun-sel was Sheryl A. French, Office of the Assistant Chief Counsel, International TradeLitigation, U.S. Customs and Border Protection.

OPINIONReif, Judge:

This case is before the court to determine the proper classificationof the imported subject merchandise. The dispute concerns the tariff


classification of secondhand clothing imported by DIS Vintage LLC(“plaintiff” or “DIS Vintage”). Plaintiff challenges the determinationby United States Customs and Border Protection (“Customs”) thatthe subject merchandise comprises “commingled goods.” This deter-mination in turn led to Customs’ subsequent classification of thesubject merchandise under subheading 6204.63.3510 of the Harmo-nized Tariff Schedule of the United States (“HTSUS”),1 which coverswomen’s trousers or breeches and carries a 28.6 percent ad valoremduty. Plaintiff argues that the subject merchandise is properly clas-sified under subheading 6309.00.0010 of the HTSUS, which covers“worn clothing” and is duty-free. The question presented is whetherthe subject merchandise is properly classified as “worn clothing” inHeading 6309 or whether the subject merchandise is “commingledgoods” and properly classified as “women’s trousers or breeches” un-der Heading 6204 or as another item of clothing contained in theentry.

Plaintiff and the United States (“defendant” or “Government”) filedcross-motions for summary judgment addressing the proper classifi-cation of the imported merchandise. See Pl.’s Mem. of Law in Supp. ofPl.’s Mot. For Summ. J., ECF No. 26 (“Pl. Br.”); Mem. In Opp. to Pl.’sMotion for Summ. J and in Supp. of Def. Cross-Mot. For Summ. J.,ECF No. 36 (“Def. Br.”). This Court has jurisdiction over this actionunder 28 U.S.C. § 1581(a).

For the reasons set forth below, the court stays the cross-motionsfor summary judgment and remands to Customs to determine theappropriate classification and rate of duty in conformity with thisdecision.

BACKGROUND

The action before the court pertains to 443 bales of secondhandclothing imported into the United States (the “subject merchandise”).DIS Vintage Statement of Material Facts for Which There is NoGenuine Issue to be Tried (“Pl. Stmt. Facts”), ECF No. 27 ¶ 16;Defendant’s Responses to Plaintiff DIS Vintage’s Rule 56.3 Statementof Material Facts (“Def.’s Resp. to Pl. Stmt. Facts”), ECF No. 36–3 ¶16. The bales were entered in two sizes, 100 pounds and 1,000pounds. Def.’s Statement of Undisputed Facts (“Def. Stmt. Facts”),ECF No. 36–2. ¶ 6; DIS Vintage’s Responses to Defendant’s Rule 56.3Statement of Undisputed Facts (“Pl.’s Resp. to Def. Stmt. Facts”),ECF No. 41. ¶ 6. The subject merchandise was filed under Entry No.AFP-1304311 on April 23, 2013, at the Port of Miami, with a declared

1 All citations to the HTSUS, including Chapter Notes and General Notes, are to the 2013edition. This version was in effect on April 23, 2013, when plaintiff entered the subjectmerchandise. See 19 C.F.R. § 141.69.


value of $23,079.45. Pl. Stmt. Facts ¶¶ 13, 16; Def.’s Resp. to Pl. Stmt.Facts ¶¶ 13, 16. Plaintiff entered the subject merchandise as “[w]ornclothing” under HTSUS heading 6309.00.0010, which is duty-free. Pl.Stmt. Facts ¶ 18; Def.’s Resp. to Pl. Stmt. Facts ¶ 18. The subjectmerchandise was sold to DIS Vintage (a broker of secondhand cloth-ing) by Le Relais, an entity in France that receives donated clothing.2

Pl. Stmt. Facts ¶¶ 3, 19–20, 23; Def.’s Resp. to Pl. Stmt. Facts ¶¶ 3,19–20, 23.

After the subject merchandise was entered, Customs selected 20samples for review and inspection. Pl. Stmt. Facts ¶ 31; Def. Stmt.Facts ¶ 27. On June 3, 2013, Customs notified DIS Vintage that the“review of the samples and prior rulings revealed that the subject[merchandise] ‘did not meet the requirements of appreciable wear inorder to be classified under HTS 6309.00.0010.’” Pl. Stmt. Facts ¶ 33;Def.’s Resp. to Pl. Stmt. Facts ¶ 33. Customs determined that, whilesome of the samples were classifiable as “[w]orn clothing”, othersamples were properly classified in a heading in Chapter 61 or 62.See, Def. Stmt. Facts ¶ 29; Pl.’s Resp. to Def. Stmt. Facts ¶ 29. Assuch, Customs ascertained that the subject merchandise was “com-mingled goods” and thus subject to the highest duty rate of any one ofthe samples, which led to the classification of the subject merchandiseunder subheading 6204.63.3510 with a duty rate of 28.6 percent. Pl.Stmt. Facts ¶ 34; Def.’s Resp. to Pl. Stmt. Facts ¶ 34.

Plaintiff timely filed administrative protest 5201–13–100191 chal-lenging Customs’ classification of subject merchandise. Pl. Stmt.Facts ¶ 53; Def.’s Resp. to Pl. Stmt. Facts ¶ 53. The protest wasdenied, and on January 13, 2016, plaintiff filed this action with theCourt to contest the final decision under section 515 of the Tariff Actof 1930, as amended (19 U.S.C. §1515). Second Amended Compl., ECFNo. 19 ¶¶ 1, 11.

In addition to the 20 samples selected and reviewed by Customs,plaintiff submitted 16 and defendant submitted 5 additional samplesto the Court. Def. Stmt. Facts ¶¶ 43, 50; Pl.’s Resp. to Def. Stmt. Facts¶¶ 43, 50. Plaintiff retained possession of four bales from the entry atissue in its warehouse. Def. Stmt. Facts ¶ 38; Pl.’s Resp. to Def. Stmt.Facts ¶ 38. The four bales were marked with green inspection tapestating that they had been “examined by U.S. Customs and BorderProtection.” Def. Stmt. Facts ¶ 39; Pl.’s Resp. to Def. Stmt. Facts ¶ 39.

2 Plaintiff maintains that Le Relais is “one of the biggest charitable institutions in Francethat receives donations of used clothes.” Pl. Stmt. Facts ¶ 19. Defendant does not disputethat the subject merchandise from Le Relais is donated clothing, but denies that “plaintiffhas cited or produced any evidence to establish that all clothing imported from Le Relais is‘used.’” Def.’s Resp. to Pl. Stmt. Facts ¶¶ 19–20. Defendant “[d]enies that plaintiff hasprovided any evidence to establish that Le Relais is a charity.” Def.’s Resp. to Pl. Stmt. Facts¶ 19. This dispute is not material to the classification of the goods.


On February 24, 2017, “Plaintiff selected and removed four samplesfrom each of the four bales it retained.” Def. Stmt. Facts ¶¶ 41, 42(quoting Pl. Ex. 1 (Interrogatories) at 11). Plaintiff supplied defen-dant with pictures of the 16 additional samples during discovery. Def.Stmt. Facts ¶ 40; Pl.’s Resp. to Def. Stmt. Facts ¶ 40.

Defendant obtained the five samples that it submitted to the Courtduring an inspection on March 14, 2017 of the four bales in plaintiff’spossession. Def. Stmt. Facts ¶¶ 47, 50; Pl.’s Resp. to Def. Stmt. Facts¶ 47, 50. The parties agree that the 41 samples in the Court’s pos-session are representative of the subject merchandise. Def. Reply Br.at 14; Pl.’s Resp. to Def. Stmt. Facts ¶¶ 23–24.

STANDARD OF REVIEWCustoms’ protest decisions are reviewed de novo on the record

before the Court. 28 U.S.C. § 2640(a)(1). USCIT Rule 56 permitssummary judgment when “there is no genuine dispute as to anymaterial fact....” USCIT R. 56(a). “[A]ll evidence must be viewed inthe light most favorable to the nonmoving party, and all reasonablefactual inferences should be drawn in favor of the nonmoving party.”Dairyland Power Coop. v. United States, 16 F.3d 1197, 1202 (Fed. Cir.1994) (citations omitted). In a dispute over a tariff classification,plaintiff has the burden of showing that Customs’ classification isincorrect. Jarvis Clark Co. v. United States, 733 F.2d 873, 876 (Fed.Cir. 1984). If plaintiff meets that burden, the court has an obligationto arrive at “the correct result, by whatever procedure is best suitedto the case at hand.” Id. at 878 (footnote omitted).

The Court has “an independent responsibility” to ascertain theproper meaning and scope of HTSUS terms in a tariff classificationdispute. Warner-Lambert Co. v. United States, 407 F.3d 1207, 1209(Fed. Cir. 2005). Determining whether an imported item has beenproperly classified necessitates a two-step process. Sports Graphics,Inc. v. United States, 24 F.3d 1390, 1391 (Fed. Cir. 1994). First, theCourt must “ascertain[] the proper meaning of specific terms withinthe tariff provision.” BenQ America Corp. v. United States, 646 F.3d1371, 1376 (Fed. Cir. 2011) (citations omitted). Second, the Courtneeds to “determin[e] whether the merchandise at issue comes withinthe description of such terms as properly construed.” Id. The first stepis a question of law and the second step is one of fact. Pillowtex Corp.v. United States, 171 F.3d 1370, 1373 (Fed. Cir. 1999).

LEGAL FRAMEWORKThe General Rules of Interpretation (“GRIs”) of the HTSUS govern

the proper classification of merchandise coming into the UnitedStates. Carl Zeiss, Inc. v. United States, 195 F.3d 1375, 1379 (Fed. Cir.


1999). GRI 1 requires that classification “be determined according tothe terms of the headings and any relative section or chapter notes.”GRI 1. “Section and chapter notes are not optional interpretive rules,but are statutory law....” Aves. in Leather, Inc. v. United States, 423F.3d 1326, 1333 (Fed. Cir. 2005) (internal quotations omitted). “HT-SUS terms are construed according to their common commercialmeanings.” Len–Ron Mfg. Co. v. United States, 334 F.3d 1304, 1309(Fed. Cir. 2003). To construe a given term, the Court may rely on itsown understanding of terms as well as consult sources such as lexi-cographic and scientific authorities, dictionaries and other reliableinformation. Baxter Healthcare Corp. v. United States, 182 F. 3d 1333,1338 (Fed. Cir. 1999). For additional guidance on the scope andmeaning of tariff headings and chapter and section notes, the Courtmay also look to the Harmonized Commodity Description and CodingSystem Explanatory Notes which are developed by the World Cus-toms Organization (WCO). Dell Prods. LP v. United States, 34 CIT688, 692, 714 F. Supp. 2d 1252, 1257 (2010). While not binding law,Explanatory Notes are “generally indicative of the proper interpreta-tion of a tariff provision.” Agfa Corp. v. United States, 520 F.3d 1326,1239 (Fed. Cir. 2008) (citation omitted).

DISCUSSION

In conducting its de novo review, first, the court will state thepositions of the parties. Second, the court will turn to interpretingHeading 6309 “[w]orn clothing and other worn articles” (collectively,“worn clothing”). To do so, the court will define “appreciable wear” inChapter Note 3(i), which requires that “worn clothing” “show signs ofappreciable wear.” The court will also determine whether the require-ment in Chapter Note 3(ii), that “worn clothing” be entered “in bulkor in bales, sacks or similar packings” (collectively, “in bales”), is a“particular tariff treatment” such that it prevails over the generalrule for commingled goods in General Note 3(f)(i). Additionally, thecourt will address Customs’ reliance on past HQ Rulings that appliedHeading 6309, specifically as Customs’ reliance on those rulingshelped to guide Customs’ review with regard to the samples in theinstant case. Finally, the court will determine that a remand toCustoms is the appropriate remedy in deciding whether the subjectmerchandise is classifiable under Heading 6309 or whether the sub-ject merchandise is properly identified as “commingled goods” and,thus, subject to a rate of duty under an alternative heading.

I. Positions of the Parties

Plaintiff supports classification of the subject merchandise underHeading 6309, which covers “worn clothing.” Pl. Br. at 16. Specifically,


plaintiff contends that the subject merchandise is classifiable undersubheading 6309.00.0010, which provides as follows:

6309 Worn clothing and other worn articles.

6309.00.00 Worn clothing and other worn articles.

6309.00.0010 Worn clothing.

Plaintiff’s proposed criteria for “worn clothing” “permit[s] all used orsecondhand clothing with any trace of diminished value or appear-ance as a result of any previous use, wear, or handling” to satisfy therequirements of Heading 6309. Pl.’s Combined Reply in Support ofMot. for Summ. J. and Resp. to Def.’s Cross-Mot. for Summ. J., ECFNo. 40 (“Pl. Reply Br.”) at 6. In sum, plaintiff’s position is that all“used clothing” presented in bales is “worn clothing” under Heading6309. Pl. Br. at 25.

Defendant’s standard for “worn clothing” requires that an itemmust “(1) ‘show visible damage, impairment or change to its physicalcondition,’ and that change must be (2) the ‘result of use.’” Def. ReplyMem. in Further Support of Cross-Mot. for Summ. J., ECF No. 42(“Def. Reply Br.”) at 6. Applying this standard, defendant agrees thatsome of the samples taken from the subject merchandise would havebeen classifiable as “worn clothing” under Heading 6309 and, as such,duty-free; however, defendant argues that other samples were clas-sifiable under other headings that are dutiable. Def. Br. at 24.

On this basis, defendant concludes that Customs was required toapply General Note 3(f), which defines “commingled goods” as goodsthat are subject to different rates of duty and are mingled together.Def. Br. at 26–27. Applying General Note 3(f), defendant argues thatwhen a shipment is found to be comprised of commingled goods, theentire shipment is subject to the rate of duty of the sample with thehighest rate of duty from the entry. Def. Br. at 23. In this case,Customs determined that at least one of the samples was classifiablein subheading 6204.63.3510, dutiable at 28.6 percent, which coverswomen’s trousers and breeches.3 4 Def. Br. at 9.

3 The record does not contain an itemized list of the classification determinations withinChapters 61 (“Articles of Apparel and Clothing Accessories; Knitted or Crocheted”) and 62(“Articles of Apparel and Clothing Accessories; Not Knitted or Crocheted”) as assigned toeach of the 20 samples reviewed by Customs. The record shows only that Customs deter-mined that subheading 6204.63.3510 was the proper classification for at least one of thesamples, which Customs determined to be the highest duty rate among the samples, and,therefore, determined to be the classification for the entire entry. Def. Br. at 31.4 The relevant subheading provides as follows: 6204 Women’s or girls’ suits, ensembles, suit-type jackets, blazers, dresses,

skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts(other than swimwear); Suits:

6204.63 Of synthetic fibers: 6204.63.35 Other. Trousers and breeches. 6204.63.3510 Women’s (648).


II. The Tariff ProvisionHeading 6309 covers “[w]orn clothing and other worn articles.” As

the positions of the parties, above, indicate, proper classification ofthe subject merchandise in this case hinges on the meaning of “wornclothing.” The term “worn clothing” is not defined in the HTSUS andhas not been defined by this Court. Chapter Note 3 provides addi-tional requirements for Heading 6309.

Heading 6309 applies only to the following goods:(a) Articles of textile materials:

(i) Clothing and clothing accessories, and parts thereof;

(ii) Blankets and traveling rugs;

(iii) Bed linen, table linen, toilet linen and kitchen linen;

(iv) Furnishings, other than carpets of headings 5701 to 5705and tapestries of heading 5805.

(b) Footwear and headgear of any material other than asbestos.

In order to be classified in this heading, the articles mentionedabove must comply with both of the following requirements:

(i) They must show signs of appreciable wear; and

(ii) They must be entered in bulk or in bales, sacks or similarpackings.

In sum, for the subject merchandise to be covered by Heading 6309,it must meet three requirements: (1) be one of the aforementionedarticles of textile materials or specified footwear and headgear; (2)“show signs of appreciable wear”; and, (3) be entered “in bales.” Theparties do not contest that the subject merchandise meets the firstrequirement. Accordingly, the court proceeds to consider the secondand third requirements.

A. Show Signs of Appreciable WearThe first requirement of Chapter Note 3 mandates that the mer-

chandise “show signs of appreciable wear.” “Appreciable wear” is notdefined by the HTSUS and has not been defined by this Court.

Both parties offer dictionary definitions of “appreciable.” Plaintiffcites WEBSTER’S THIRD NEW INT’L DICT. UNABRIDGED (1993), “capable ofbeing readily perceived or estimated.” Pl. Br. at 25. Defendantsupplies the definition “large enough to be important or clearly no-ticed.” Def. Br. at 16 (citing COLLINS DICTIONARY, https://www.collinsdictionary.com/us/dictionary/english/appreciable (last visitedJuly 16, 2017)). Defendant also offers, “enough to be perceived orestimated; noticeable; measurable.” Def. Br. at 17 (citing WEBSTER’S


NEW WORLD DICTIONARY, THIRD COLLEGE EDITION 67 (1988)). Based on thedefinitions provided, defendant asserts that “appreciable” means “vis-ible” in the context of the Chapter Note. Def. Reply Br. at 9.

While the parties offer different definitions, the definitions share acommon thread. All of the definitions provided support a reading of“appreciable” that is synonymous with “noticeable.” Pl. Br. at 25; Def.Br. at 16–17. The definition offered by plaintiff includes the term“readily perceived,” and the definition offered by defendant includesthe term “clearly noticed” (emphasis supplied). Id. Thus, under Head-ing 6309, “appreciable” means that the quantity or extent of the“wear” matters only insomuch as the “wear” on the merchandise canbe readily or clearly noticed. In full context, the requirement readsthat “[the articles] must show signs of appreciable wear” (emphasissupplied). The phrasing “show signs” bolsters the understanding thatfor the “wear” to be readily or clearly noticeable, it needs to be visibleto eye.

Next, the court turns to defining “wear” in the context of the term“appreciable wear” as it appears in Chapter Note 3. The partiesprovided numerous definitions, which fall into two main categories:(1) a definition offered by plaintiff meaning “the act of wearing”(emphasis supplied); and, (2) various definitions offered by both par-ties meaning “the result of wear” or “damage” (emphasis supplied).

For the first category, plaintiff offered the definition “[t]he act ofwearing or the state of being worn; use” from the AMERICAN HERITAGE

DICTIONARY OF THE ENGLISH LANGUAGE (2011). Pl. Br. at 25. The definitionof “wear” as “the act of wearing...” is not per se inconsistent with theterm “worn” in the Heading; however, the definition is inconsistentwith Chapter Note 3(i) because “the act of wearing” cannot show signsthat are “appreciable.” It would not make sense for “worn” to have onemeaning in the Heading and “wear” to have another meaning in theChapter Note intending to clarify the Heading. Therefore, notwith-standing that “worn” is an adjective in “worn clothing” and “wear” isa noun in “appreciable wear,” the two must share the same underly-ing meaning. In sum, the court concludes that the definition of “wear”as “the act of wearing” is not supported by the language of Heading6309 and Chapter Note 3.

None of the definitions in the second category that were offered byboth parties is inconsistent with the language of Heading 6309 andChapter Note 3. The definitions support “worn” as meaning “dam-aged” or “impaired,” and “wear” as meaning “damage” or “impair-ment.”5 In the forthcoming discussion, “wear” will be used to include“wear” and its corresponding adjective form “worn.”

5 Plaintiff offers two definitions: (1) “worn” as “diminished in value or usefulness throughwear, use, handling, etc.: worn clothing” RANDOM HOUSE DICT. OF THE ENGLISH LANGUAGE (1973)


It is clear from the definitions provided that “wear” has two com-ponents: (1) a change involving deterioration; and, (2) how the changecame to be. With regard to the first component, a change, the partiesdisagree as to whether that change has to be a physical change.Plaintiff’s preferred definition is one in which “wear” includes achange in “value or usefulness.” See Pl. Br. at 25–26. However, allother definitions provided by plaintiff and defendant involve a physi-cal change. See supra note 5. The court determines that the changeinvolving deterioration is a physical change — damage or impair-ment. For reasons similar to above, this component of “wear” issupported by the requirement in Chapter Note 3(i) that an articlemust “show signs of appreciable wear.”

The second component of “wear” is how the damage or impairmentcame to be. The court determines that the physical change comes tobe by “use.” To “use” a garment means to wear a garment on one’sperson. In discussing the second component, the court will utilize theword “use” exclusively so as to avoid confusion with the term the courtseeks to define: “wear.”

In defendant’s briefs and at Oral Argument, defendant at timessupports having “continued use” be the standard for the second com-ponent — how the damage or impairment came to be. Def. Br. at16–17; Recording of Oral Argument at 37:38–37:45. Customs has alsooffered “continued use” as the standard for this component sinceissuing HQ 960577 in 1998. Customs Ruling Letter, HQ 960577 (Aug.7, 1998).

The court determines that “continued use” is not necessary, “use” issufficient, and “use” is the correct definition for the second componentof the meaning of “wear.” The court reaches this conclusion becausethe first component of “wear” requires physical damage or impair-ment. If “use” is not sufficient to cause damage or impairment, thenthe merchandise will not and should not meet the definition of “wear.”(“RANDOM HOUSE DICTIONARY definition”); and, (2) “wear” as “The result of wearing or use:diminution or impairment due to use.” WEBSTER’S THIRD NEW INT’L DICT. UNABRIDGED (1993). Pl.Br. at 25. Defendant offers seven definitions: (1) “worn” as “past participle of wear,” “1.Showing the effects of use, wear, etc.” and “2. Damaged by use or wear.” WEBSTER’S NEW

WORLD DICTIONARY, THIRD COLLEGE EDITION 1540 (1988) ; (2) “worn” as “1. Damaged and shabbyas a result of much use.” NEW OXFORD AMERICAN DICTIONARY, THIRD EDITION 1993 (2010); (3)“worn” as “2. Used, as a garment; hence, much used and showing the results of wear.” FUNK

& WAGNALL’S NEW STANDARD DICTIONARY OF THE ENGLISH LANGUAGE 273 (1952); (4) “worn” as “1.Affected by wear or use,” “2. Impaired or damaged by wear or use.” THE AMERICAN HERITAGE

DICTIONARY OF THE ENGLISH LANGUAGE, NEW COLLEGE EDITION 1475–76 (1976); (5) “worn” as“something that is worn looks old and damaged because it has been used a lot.” MACMILLAN

DICTIONARY; (6) “wear” as “to cause to deteriorate by use...b: to impair or diminish by use orattrition.” WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 2589 (1981); and, (7) “wear” as “theverb as ‘damage or destroy something by friction or continued use’ or the noun as “damagecaused by continuous use.” OXFORD AMERICAN DICTIONARY AND THESAURUS, SECOND EDITION 1484.Def. Br. at 15–16.


Plaintiff favors a definition of “wear” in which “handling” is onemeans by which the wear may occur. Pl. Br. at 26. Plaintiff relies onthe RANDOM HOUSE DICTIONARY definition to argue that thefirst component — viz., the physical change — can come from some-thing other than “use,” namely “packing, shipping, and handling.”6

Pl. Reply Br. at 11. Defendant points to Explanatory Note 63.09 tosupport its contention that damage or impairment from handlingdoes not have a place within the definition of “worn clothing.” Def. Br.at 16. Explanatory Note 63.09 states:

To be classified in this heading the articles...must comply withboth of the following requirements. If they do not meet theserequirements, they are classified in their appropriate headings.

(A) They must show signs of appreciable wear, whether or notthey require cleaning or repair before use; New articles withfaults in weaving, dyeing, etc., and shop-soiled articles are ex-cluded from this heading.

(B) They must be presented in bulk (e.g., in railway goods wag-ons) or in bales, sacks or similar bulk packings, or in bundlestied together without external wrapping, or packed roughly incrates....7

Defendant argues that subsection A is “a list of items damaged otherthan by use.” Def. Br. at 16 (emphasis in original).

The court finds this explanation convincing. “New articles withfaults” are items with damage or impairment caused by manufactur-ing. Dictionary definitions of the term “shop-soiled” indicate that thedamage or impairment is caused to items from being on display, orhandled, in a store.8 While Explanatory Notes are not binding on thisCourt, they are persuasive, and further support the court’s determi-

6 Related to this point, plaintiff argues that the “in bales” requirement of Chapter Note 3(ii)diminishes the appearance of the clothing. Pl. Reply Br. at 11. Plaintiff points to clothingbeing “disheveled and wrinkled as a result of being pressure-crammed into bales.” Pl. ReplyBr. at 11. Essentially, plaintiff argues that the “in bales” requirement makes the clothingcontained therein show “appreciable wear.” Id. This logic is circular and would mean thatany clothing arriving “in bales” per se satisfies both requirements of Heading 6309. ChapterNote 3 and Explanatory Note 63.09 make clear that articles having to “show signs ofappreciable wear” and to be entered “in bales” are two separate requirements. See ChapterNote 3; Explanatory Note 63.09. The “in bales” requirement cannot impart “appreciablewear” onto the articles.7 All citations to the Explanatory Notes are to the 2012 edition. See World Customs Org.,Harmonized Commodity Description and Coding System.8 “Shopsoiled: 1. Worn, faded, tarnished, etc. from being displayed in a shop or store. USequivalent: shopworn.” (COLLINS DICTIONARY, https://www.collinsdictionary.com/dictionary/english/shopsoiled (last visited April 14, 2020)). “Shop-soiled: 1. If goods sold in shops areshop-soiled, they are slightly dirty or damaged and therefore reduced in price.” (CAMBRIDGE

DICTIONARY, https://dictionary.cambridge.org/us/dictionary/english/shop-soiled (last visitedApril 14, 2020)). “Shopworn: 1. If clothes or other goods in a store are shopworn, they look


nation that the second component of the term “wear” requires thatthe damage or impairment be by “use.” In sum, the court determinesthat the term “appreciable wear” is noticeable damage or impairmentcaused by use.

B. Entered in Bulk or in Bales, Sacks or SimilarPackings

The third requirement in Chapter Note 3 is that “worn clothing” beentered “in bulk or in bales, sacks or similar packings.” The partiesagree on what it means for articles to be entered “in bales.” However,plaintiff challenges the justification provided by Customs for its de-termination that the subject merchandise is commingled goods.Plaintiff bases its challenge on the grounds that the “in bales” re-quirement is a “particular tariff treatment” that supersedes Customs’authority to apply the general rule for commingled goods. See Pl. Br.at 28–29. Plaintiff argues in particular that the weight and packagingrequirements in Heading 6309 constitute a particular tariff treat-ment. Recording of Oral Argument at 32:20–32:59.

The relevant parts of HTSUS General Note 3(f) are as follows:

(i) Whenever goods subject to different rates of duty are sopacked together or mingled that the quantity or value of eachclass of goods cannot be readily ascertained by customs officers(without physical segregation of the shipment or the contents ofany entire package thereof), by one or more of the followingmeans: (A) sampling, (B) verification of packing lists or otherdocuments filed at the time of entry, or (C) evidence showingperformance of commercial settlement tests ... the commingledgoods shall be subject to the highest rate of duty applicable toany part thereof unless the consignee or his agent segregates thegoods pursuant to subdivision (f)(ii) hereof....

(v) The provisions of subdivision (f) of this note shall apply onlyin cases where the tariff schedule does not expressly provide aparticular tariff treatment for commingled goods.

General Note 3(f) (emphasis supplied). General Note 3(f)(v) declaresthat the HTSUS must “expressly provide a particular tariff treat-ment” and that if a “particular tariff treatment” is provided, thattariff treatment would take precedence over the default “commingledgoods” rule of General Note 3(f)(i) (emphasis supplied).slightly damaged or dirty, especially because they have been used in a display.” (MACMILLAN

DICTIONARY, https://www.macmillandictionary.com/us/dictionary/american/shopworn (lastvisited April 14, 2020)).


A “particular tariff treatment” is “expressly provide[d]” by theHTSUS when goods subject to different rates of duty are so mingledthat a classification as commingled goods would be appropriate, butfor the HTSUS providing a specific tariff provision for the goods. SeeAmoco Oil Co. v. United States, 749 F.2d 1576 (Fed. Cir. 1984) (wherethe Court of Appeals for the Federal Circuit (“CAFC”) affirmed thisCourt’s decision to uphold the determination by the U.S. CustomsService (“USCS,” the agency predecessor to Customs) that the mer-chandise of plaintiff Amoco was not “commingled goods”); see alsoGeneral Note 3(f). In Amoco Oil, Amoco imported a mixture of center-cut natural gas liquids (NGLs) and propane (“Amoco Mixture”).Amoco Oil Co. at 1577–1578. NGLs and propane each received duty-free treatment under the predecessor to the HTSUS, the Tariff Sched-ule of the United States (“TSUS”).9 Amoco argued that the AmocoMixture was “commingled goods” under General Heading 7 (theTSUS equivalent to General Note 3(f)) and subject to classificationunder either heading.10 Instead, the USCS classified the Amoco Mix-ture under TSUS 430.00, which covered “mixtures of two or moreorganic compounds.” This provision carried a duty rate of 5 percentad valorem.

The CAFC found that by the terms of General Heading 7, the AmocoMixture could not be “commingled goods” because the “highest raterule is applicable only where articles subject to different rates of dutyare commingled.” Id. at 1580. Additionally, the CAFC noted “that caselaw supports the conclusion that where merchandise is determined tobe a mixture, the commingling headnote does not apply.” Id. There-fore, Amoco Oil suggests that a mixture of two goods, provided for ina specific tariff provision, is an example of a “particular tariff treat-ment.”

Plaintiff asserts that “[a] tariff heading that requires massiveamounts of clothing with uncertain quantities to be mixed together ina specific type of packaging qualifies as a ‘particular’ treatment forcommingled goods.” Pl. Br. at 29. Plaintiff finds it significant that

9 Under the TSUS, propane was classified under Heading 475.15 and NGLs under 475.70.

10 TSUS, General Heading 7, stated as follows:“7. Commingling of articles:(a) Whenever articles subject to different rates of duty are so packed together or mingledthat the quantity or value of each class of articles cannot be readily ascertained bycustoms officers (without physical segregation of the shipment or the contents of anyentire package thereof), by one or more of the following means ... the commingledarticles shall be subject to the highest rate of duty applicable to any part thereof unlessthe consignee or his agent segregates the articles pursuant to subdivision (b) hereof....(e) The provisions of this headnote shall apply only in cases where the schedules do notexpressly provide a particular tariff treatment for commingled articles.”


importers have “no choice” in packaging if they want their merchan-dise to enter duty-free under Heading 6309. Id. Plaintiff seeks todifferentiate Heading 6309 from other headings pertaining to articlesof clothing by pointing out that no other articles classified underChapters 61 or 62 are required to be entered “in bales.” Id.

Defendant offers two points in response. First, defendant arguesthat the “in bales” language is a packaging requirement, not a tarifftreatment. Def. Reply Br. at 13. Defendant adds that “a packagingrequirement does not dictate that all goods in the same packagereceive the same tariff treatment.” Id. Second, defendant notes thatthe packaging requirement in Heading 6309 is the second of tworequirements for classification under that Heading. Id. Defendantargues that “to apply [Chapter] Note 3 in the manner that plaintiffsuggests would eviscerate the first independent requirement,” id.:viz., that every article “show signs of appreciable wear.” Chapter Note3(i). In other words, defendant argues that plaintiff’s reading wouldlead to the result that any clothing, so long as it was imported “inbales,” would be eligible for duty-free treatment, regardless ofwhether the clothing showed “signs of appreciable wear.”

The court determines that the requirement that an article be en-tered “in bales” and by weight is not a “particular tariff treatment.”The HTSUS contains other tariff provisions that include packingrequirements, which, similarly, do not constitute a particular tarifftreatment.11 Conversely, the HTSUS contains particular tariff treat-ments.12 Finally, if the “in bales” requirement of Heading 6309 weretreated as a “particular tariff treatment” within the meaning of Gen-eral Note 3(f)(v), that treatment would render the first requirement ofHeading 6309 — that the articles “show signs of appreciable wear” —a nullity, contrary to basic precepts of statutory interpretation.13 In

11 For example: subheading 1604.14.40, “Prepared fish...tunas, skipjack, and bonito...Inbulk or in immediate containers weighing with their contents over 6.8 kg each...”; subhead-ing 1806.20.20, “Chocolate and other food preparations containing cocoa...Other prepara-tions in blocks, slabs or bars, weighing more than 2 kg or in liquid, paste, powder, granularor other bulk form in containers or immediate packings, of a content exceeding 2 kg ... Inblocks or slabs weighing 4.5 kg or more each;” and, subheading 0804.30.20, “Pineapples,fresh or dried, not reduced in size: in bulk.”12 At Oral Argument, defendant offered “mixed vegetables” in subheading 0712.90.85 and“mixed nuts” in subheading 0813.50.00 as examples of items that could be considered“commingled goods” under General Note 3(f), but are not, because particular tariff provi-sions are provided for these items in the HTSUS. Recording of Oral Argument at25:15–26:01.13 “The cardinal principle of statutory construction is to save and not to destroy. It is ourduty to give effect, if possible, to every clause and word of a statute....” United States v.Menasche, 348 U.S. 528, 538–539 (1955) (internal citations and quotations omitted). Seealso “The rules of statutory construction require a reading that avoids rendering superflu-ous any provision of a statute.” Ishida v. United States, 59 F.3d 1224, 1230 (Fed. Cir. 1995)(internal citation omitted).


conclusion, “worn clothing” under Heading 6309 is merchandise thatcomplies with the three requirements of Chapter Note 3, includingthe above definition of “appreciable wear.”

III. Classification of the Subject Merchandise

The subject merchandise is comprised of 443 bales of secondhandclothing. Pl. Br. at 2. There are 41 samples in the court’s possession.It is not disputed that the subject merchandise is comprised of ar-ticles of textile materials or the specified footwear or headgear asrequired under Chapter Note 3. It is also not disputed that the subjectmerchandise arrived “in bales,” under Chapter Note 3(ii). Classifica-tion, therefore, of the subject merchandise hinges on the requirementof Chapter Note 3(i) — whether the samples of the subject merchan-dise “show signs of appreciable wear.”

A. Customs’ Rulings and Guidance Pertaining to “ShowSigns of Appreciable Wear” Are Inconsistent withHeading 6309

The court defined “appreciable wear” as noticeable damage or im-pairment caused by use. See supra Section II. A. In this case, Cus-toms’ determination of whether the samples “show signs of appre-ciable wear” “was based, in part, on a review of Customs rulings,including rulings interpreting heading 6309....” Answer, ECF No. 23¶ 39. In particular, on June 3, 2013, Customs issued a Notice of Actionadvising plaintiff that Customs was relying on several past Customsand USCS rulings, including HQ960577, HQ967718, HQ968010 andHQ967814:

Review of samples from entry AFP-1304309–5 and Headquar-ters rulings HQ960577, HQ967718, HQ968010 and HQ967814,revealed that the merchandise imported does not meet the re-quirements of appreciable wear in order to be classified underHTS 6309.00.0010/Free. The imported garments are classifiableunder Chapter 61 or 62. The commingled garments are subjectto the appropriate provision of Chapter 61 or 62 for which thehighest duty rate applies. The entries will be liquidated at thehighest duty rate of the commingled goods under HTS6204.63.3510 at 28.6%.

Second Amended Compl. ¶ 21.14

In HQ 960577 (the “1998 ruling”), the USCS explained “appreciablewear” as follows: “In essence, appreciable wear is descriptive of a

14 See also “Admits that plaintiff correctly quotes portions of the CBP Form 29, Notice ofAction, issued on June 3, 2013; however, avers that the CBP Form 29, Notice of Actionspeaks for itself and is the best evidence of what is provided therein.” Answer ¶ 21.


garment or other article whose appearance has noticeably changedfrom its original/new/unused stage. This change in appearance mustbe the result of the various naturally occurring stages to which afabric succumbs as a result of continuous use.” Customs Ruling Let-ter, HQ 960577 (Aug. 7, 1998) (“1998 ruling”) at 9. In the 1998 ruling,USCS reviewed 16 garments in an attempt to provide guidance forimporters regarding what merchandise qualifies for classificationwithin Heading 6309. Fourteen of the garments were determined tonot have “appreciable wear” because they did not “exhibit fabricwhich is greatly stressed or fabric which reflects the physical dete-rioration resulting from continued use.” Id. at 11.

The 1998 ruling by the USCS is inconsistent with Heading 6309because, as settled in Section II, the definition for the first componentof “wear” is “damage or impairment.” Damage or impairment withinthe meaning of Heading 6309 may include “fabric which is greatlystressed or fabric which reflects physical deterioration resulting fromcontinued use”; however, neither of those elements — greatly stressedfabric, or fabric reflecting physical deterioration resulting from con-tinued use — is necessary to find “damage or impairment” within themeaning of Heading 6309.

Heading 6309 and Chapter Note 3 also do not require that thedamage or impairment occur only to a garment’s fabric to meet thedefinition of “appreciable wear.” The language of Heading 6309 andChapter Note 3 permit the possibility that damage to somethingother than fabric can comprise “appreciable wear.” As defendant con-ceded at Oral Argument, the damage may be to any part of thegarment—not only the fabric.15 With respect to the second componentof “wear”—how the damage or impairment came to be—“use” is theappropriate definition, not “resulting from continued use” as offeredby the 1998 ruling. 1998 ruling at 9 (emphasis supplied). As shown,the “practical understanding” of “appreciable wear” that USCS offersin the 1998 ruling is not supported by the Heading or Chapter Note3.

The 1998 ruling has informed Customs’ treatment of secondhandclothing for more than two decades and has been in force and appliedby subsequent rulings and guidance. HQ967718 and HQ967814 in2005, and HQ 968010 in 2006 relied heavily on the 1998 ruling. The1998 and 2006 rulings also culminated in guidance issued in 2014 byCustoms. This guidance, addressed by both parties in this action,provides (in relevant part):

15 “We don’t contend that the damage has to be to the fabric, the damage from the continueduse has to be to the article.” Recording of Oral Argument at 37:38–37:45.


Heading 6309 in the Harmonized Tariff Schedule (HTS) allowspreviously worn clothing entering the U.S. to enter free of duty.However, most shipments of “used clothing” imported commer-cially for sale would not be eligible for the provision 6309. Inorder to qualify for the provision 6309, the goods must showclear signs of appreciable wear (be in poor condition) and mustbe entered in bulk or in bales, sacks or similar packing. Theassumption is that clothing imported under this provision willmost likely be used as rags or other non-apparel purpose.

Pl. Br. Exhibit A (emphasis supplied).This guidance has been in effect for a number of years. Defendant

stated that the guidance was posted in several different places. De-fendant also asserted that the guidance was intended to be removed“several years ago.” Recording of Oral Argument at 48:27 – 50:55.However, defendant further stated that, as of February 21, 2020, theguidance remained posted. Id.16

The court determines that the 2014 guidance is inconsistent on itsface with Heading 6309. In fact, Customs’ guidance meets the defini-tion of an entirely different provision of the HTSUS, Heading 6310.Heading 6310 covers “used or new rags... and worn out articles oftwine, cordage, rope or cables, of textile materials.” In short, Customshas been erroneously applying Heading 6309 for at least 22 years,including as represented in the 1998 and 2006 rulings and in the 2014guidance.

B. Subject Merchandise as “Commingled Goods”As discussed in Section II.B, above, General Note 3(f) sets out the

general rule for “commingled goods.” General Note 3(f) requires thatthe goods are: (1) “subject to different rates of duty;” (2) “so packedtogether or mingled;” and, (3) that the “quantity or value of each classof goods cannot be readily ascertained by ... (A) sampling, (B) verifi-cation of packing lists ....” If these conditions are met, “the com-mingled goods shall be subject to the highest rate of duty applicableto any part thereof unless the consignee or his agent segregates thegoods pursuant to subdivision (f)(ii) hereof.”

In the instant case, at least two of the three requirements are met.The court will address requirements (2) and (3) at the outset. Thecourt determines that the subject merchandise is “so packed togetheror mingled”—having arrived in 100-pound and 1000-pound bales,whether the bales were “loosely packed” or “compressed”—as to not

16 Defendant stated at Oral Argument that defendant removed the guidance in February2020. Defendant also sought to emphasize that, from its perspective, this guidance does notrepresent the position of the Government, notwithstanding that it remained in place untilFebruary 2020. Id.


be segregable. The court further establishes that the “quantity orvalue of each class of goods cannot be readily ascertained” because thesubject merchandise may be composed of a potentially voluminousnumber of classes. The subject merchandise is composed of articlesthat if determined not to be “worn clothing” under Heading 6309, areproperly classified under various provisions in Chapters 61 or 62,which carry varying rates of duty based on the type of garment andthe type of fabric. See Def. Br. at 28–29.

With respect to the first requirement, it is possible that some of thesamples of the subject merchandise may be classifiable at differentduty rates. However, because Customs misapplied Heading 6309 andChapter Note 3 to the samples, a determination with respect to thisrequirement would be premature. Therefore, a determination as towhether the subject merchandise comprises “commingled goods” isalso premature.

IV. Remedy

The Court “may order such further administrative or adjudicativeprocedures as the court considers necessary to enable it to reach thecorrect decision.” 28 U.S.C. § 2643(b). See United States v. UPSCustomhouse Brokerage, Inc., 34 CIT 96, 128, 686 F. Supp. 2d 1337,1365–1366 (2010) (internal citations omitted) (holding that remand iswithin the Court’s discretion and a case should be remanded “whendoing so will assist the Court in reaching the correct result”). In a civilaction, the Court may order any form of appropriate relief, includingan order of remand. 28 U.S.C. § 2643(c)(1). “When an administrativeagency has made an error of law, the duty of the Court is to correct theerror of law committed by that body, and after doing so to remand thecase to the agency so as to afford it the opportunity of examining theevidence and finding the facts as required by law.” NLRB v. Enter-prise Ass’n of Steam, 429 U.S. 507, 522 (1977) (internal quotationsand citations omitted). The reviewing court must ensure “not [to]intrude impermissibly on the authority of the administrative agencyby itself taking action that implicates the agency’s expertise anddiscretion.” Int’l Light Metals v. United States, 279 F.3d 999, 1003(Fed. Cir. 2002). Whether the Court should remand a case to anadministrative agency to correct an error of law “necessarily turnsupon the precise issues the reviewing court has decided and whatquestions remain for the agency to decide on remand.” Id.

The court determines that Customs committed an error of law ininterpreting Heading 6309 and Chapter Note 3. Accordingly, the courtconcludes that a remand to Customs pursuant to 28 U.S.C. § 2643 isappropriate.


CONCLUSIONUpon meeting their new nanny, Mary Poppins, Jane and Michael

Banks show Mary Poppins the nursery and her new room.17 MaryPoppins is wearing a long dress, with an overcoat, a pink scarf and ahat with flowers. She is holding an umbrella and carrying a large bag.

Michael notices Mary Poppins’ bag: “That’s a funny sort of bag.”Mary Poppins: “Carpet.”Michael: “You mean to carry carpets in?”Mary Poppins: “No. Made of.”Jane: “This is your room, and there’s a lovely view of the park.”Mary Poppins: “Hmm. Well, it’s not exactly Buckingham Palace.

Still, it’s clean. Yes, I think it will be quite suitable. Just needs a touchhere and there. Well, first things first. I always say, the place to hanga hat is on a hat stand.” Mary Poppins pulls a six-foot tall hat standout of her bag whilst Jane and Michael stare in amazement, then peerinside Mary Poppins’ empty bag and turn it upside down. “Ah! Thiswill never do!” Mary Poppins says, removing a small mirror from thewall. “I much prefer seeing all of my face at the same time.” MaryPoppins pulls a large mirror out of her bag.

Michael, amazed again: “There — but there was nothing in it!”Mary Poppins: “Never judge things by their appearance. Even car-

petbags. I’m sure I never do.” Mary Poppins pulls out a three-foot tallplant: “A thing of beauty is a joy forever.” Michael, looking under thetable on which Mary Poppins has placed her bag, seeing nothingthere. Mary Poppins pulls out a five-foot tall lamp, a pair of shoes andjacket.

Michael to Jane: “We better keep our eye on this one.”In this instant case, the court remands to Customs for it to keep its

eye on the subject merchandise and take the following steps in con-formity with this decision: (1) examine and apply Heading 6309 andChapter Note 3 to the 41 samples of subject merchandise to deter-mine the appropriate classification of each sample; and, (2) if Cus-toms determines that the subject merchandise is “commingled goods”pursuant to General Note 3(f), Customs shall then apply the highestrate of duty for any one of the samples to the subject merchandise.

For the foregoing reasons, it is herebyORDERED that consideration of the parties’ cross-motions for

summary judgment is stayed; it is furtherORDERED that this matter is remanded to Customs to determine

the appropriate classification and rate of duty in conformity with thisdecision; it is further

17 Walt Disney’s MARY POPPINS (1964), based on the book series MARY POPPINS (1933 – 1962)by P. L. Travers (Pamela Lyndon Travers, OBE, born Helen Lyndon Goff).


ORDERED that remand results are due within 90 days of the dateof this decision; it is further

ORDERED that any comments on the remand results shall besubmitted within 30 days of the filing of the results; and it is further

ORDERED that any replies to the comments are due 15 daysthereafter.Dated: May 6, 2020

New York, New York/s/ Timothy M. Reif

TIMOTHY M. REIF, JUDGE


u.s. court of international trade · dia burke, assistant director. of counsel was ayat mujais, ......

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